 Is the covariance of international stock market returns regime dependent?Christian Jochum The European Journal of Finance, 2001, vol. 7, issue 3, 247-268 Abstract: The application of a SWARCH model to stock market returns allows one to endogenously determine the regime dependence of the stock market volatility. Comparison of the results from a sample of daily data from five major stock markets shows that the majority of the markets switch regimes simultaneously. This fact is used to investigate the relation between market volatility and the behaviour of the variance—;covariance matrix. It is found that the international variance—;covariance matrix is not stable and that changes in the matrix are dependent on the volatility regime. A high level of variance causes an increase in the average correlation coefficient. The co-movement of the markets is further described by a steady increase in the covariance over the whole sample period. It can be shown that both the time component and the regime dependence of the average correlation have separate and significant explanatory power. Keywords: Swarch Correlation International Financial Markets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:7:y:2001:i:3:p:247-268 Ordering information: This journal article can be ordered from DOI: 10.1080/13518470010042210 Access Statistics for this article The European Journal of Finance is currently edited by Chris Adcock More articles in The European Journal of Finance from Taylor & Francis Journals |
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