Dynamic Stock Market Covariances in the Eurozone

Gregory Connor () and Anita Suurlaht

Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth

Abstract: This paper examines the short-term dynamics, macroeconomic sensitivities, and longer-term trends in the variances and covariances of national equity market index daily returns for eleven countries in the Euro currency zone. We modify Colacito, Engle and Ghysel?s Mixed Data Sampling Dynamic Conditional Correlation Garch model to include a new scalar measure for the degree of correlatedness in time-varying correlation matrices. We also explore the robustness of the fi?ndings with a less model-dependent realized covariance estimator. We fi?nd a secular trend toward higher correlation during our sample period, and signi?cant linkages between macroeconomic and market-wide variables and dynamic correlation. One notable fi?nding is that average correlation between these markets is lower when their average GDP growth rate is lower or when more of them have negative GDP growth.

Keywords: : dynamic conditional correlation; multivariate GARCH; international stock market integration; European Monetary Union. (search for similar items in EconPapers)
JEL-codes: C51 C58 G15 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012
New Economics Papers: this item is included in nep-eec and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://repec.maynoothuniversity.ie/mayecw-files/N222-12.pdf (application/pdf)

Related works:
Journal Article: Dynamic stock market covariances in the Eurozone (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:may:mayecw:n222-12.pdf

Access Statistics for this paper

More papers in Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth Contact information at EDIRC.
Bibliographic data for series maintained by ().