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The Multivariate DCC-GARCH Model with Interdependence among Markets in Conditional Variances’ Equations

Marcin Faldzinski () and Michal Pietrzak ()

No 164/2015, Working Papers from Institute of Economic Research

Abstract: The article seeks to investigate the issue of interdependence that during crisis periods in the capital markets is of particular importance due to the likelihood of causing a crisis in the real economy. The research objective of the article is to identify this interdependence in volatility. Therefore, first we propose our own modification of the DCC-GARCH model which is so designed as to test for interdependence in conditional variance. Then, the DCC-GARCH-In model was used to study interdependence in volatility of selected stock market indices. The results of the research confirmed the presence of interdependence among the selected markets.

Keywords: DCC-GARCH model; interdependence; conditional variance (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
Date: 2015-11
New Economics Papers: this item is included in nep-ecm and nep-ets
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