DETECTING AND MODELING TAIL DEPENDENCE

Fabio Bellini () and Gianna Figà-Talamanca
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Fabio Bellini: Dipartimento di Metodi Quantitativi per le Scienze Economiche ed Aziendali, University of Milan-Bicocca, Piazza Ateneo Nuovo, 1 Milan, 20126, Italy

International Journal of Theoretical and Applied Finance (IJTAF), 2004, vol. 07, issue 03, 269-287

Abstract: The aim of this work is to develop a nonparametric tool for detecting dependence in the tails of financial data. We provide a simple method to locate and measure serial dependence in the tails, based on runs tests. Our empirical investigations on many financial time series reveal a strong departure from independence for daily logreturns, which is not filtered out by usual Garch models.

Keywords: Tail dependence; runs; Garch; Markov chain; efficient market hypothesis (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:07:y:2004:i:03:n:s0219024904002426

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DOI: 10.1142/S0219024904002426

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