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Extreme Dependence in International Stock Markets

Cathy Ning

No 8, Working Papers from Toronto Metropolitan University, Department of Economics

Abstract: This paper investigates the structure and degree of extreme dependence in international equity markets using carefully selected tools from the theory of copulas. We examine both the static and dynamic dependence via unconditional and conditional copulas. We find significant asymmetric tail dependence in equity markets, with the overall larger lower tail dependence than upper tail dependence. Moreover, in Europe and East Asia but not in North America, the extreme dependence is time-varying in both its structure and degree. Our results also indicate a higher intra-continental than inter-continental tail dependence. Our findings have important implications in global risk management strategies.

Keywords: Copulas; Tail dependence; Time varying dependence; International financial markets; Risk diversification. (search for similar items in EconPapers)
JEL-codes: C14 C51 G01 G15 G32 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2009-11
New Economics Papers: this item is included in nep-ets, nep-fmk and nep-sea
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:rye:wpaper:wp008

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