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Dynamic Equicorrelation between S&P500 Index and S&P GSCI

Abdelkader Derbali () and Tarek Chebbi ()
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Tarek Chebbi: Université de Sousse

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Abstract: In this paper, we use for the first time the GARCH-DECO (1,1) to investigate empirically the dependence between S&P500 index and the sixteen selected S&P GSCI commodities index. We employ daily prices of S&P500 and S&P GSCI commodities indices over the period from January 01, 2003 to December 31, 2015. From the empirical results, the conditional dependence between S&P500 and S&P GSCI commodities indices demonstrate the presence of highly volatility and validate the existence of a greatly time-varying variance in the dynamic equicorrelation between time serie returns obtained after the estimation of the GARCH-DECO (1,1) model. Besides, the conditional heteroscedasticity volatility prediction attains their maximum after the financial crisis of 2007, especially on both years 2008 and 2009. Our empirical finding indicates the existence of highly dependency between S&P500 and S&P GSCI commodities indices which prove the financialisation of US stock market indices and commodities.

Keywords: S&P 500; S&P GSCI; Commodities; Equicorrelation; GARCH-DECO (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk and nep-rmg
Date: 2018-01-29
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