Measuring financial interdependence in asset markets with an application to eurozone equities
| Autor: | Renee Fry-McKibbin, Vance L. Martin, Cody Yu-Ling Hsiao |
|---|---|
| Rok vydání: | 2021 |
| Předmět: |
Economics and Econometrics
050208 finance media_common.quotation_subject 05 social sciences Asset market Bivariate analysis Covariance Business economics 0502 economics and business 8. Economic growth Financial crisis Econometrics Economics media_common.cataloged_instance 050207 economics European union Finance Common currency Normality media_common |
| Zdroj: | Journal of Banking & Finance. 122:105985 |
| ISSN: | 0378-4266 |
| DOI: | 10.1016/j.jbankfin.2020.105985 |
| Popis: | A general measure of asset market interdependence based on higher order comoments is developed and applied to studying weekly U.S. and eurozone equity returns from 1990 to 2017. A new test of independence is also developed. The empirical results show that interdependence peaks during the global financial crisis with the covariance and covolatility comoments being the dominant factors. Conditioning the interdependence measure on volatility does not change the overall qualitative results. Implications of the results for constructing diversified portfolios reveal economic benefits from portfolios based on higher order comoments than the usual assumption of bivariate normality, especially during the GFC. The empirical results also provide evidence that European Union membership led to higher interdependence than did the adoption of the common currency. |
| Databáze: | OpenAIRE |
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