How has the relationship between safe haven assets and the US stock market changed after the global financial crisis?
| Autor: | Yuji Sakurai |
|---|---|
| Rok vydání: | 2021 |
| Předmět: |
040101 forestry
Economics and Econometrics 050208 finance 05 social sciences Multivariate normal distribution 04 agricultural and veterinary sciences Mixture model 0502 economics and business Financial crisis Econometrics Economics 0401 agriculture forestry and fisheries Stock market Asset (economics) Economic impact analysis Portfolio optimization Hedge (finance) Finance |
| Zdroj: | Journal of International Financial Markets, Institutions and Money. 75:101351 |
| ISSN: | 1042-4431 |
| DOI: | 10.1016/j.intfin.2021.101351 |
| Popis: | In this paper, I investigate how the relationship between safe haven assets and the US stock market has changed since the global financial crisis. To do so, I propose a new concept of bear-market correlation which allows us to see the effectiveness of the safe haven asset as a hedge and portfolio diversification tool. I compute the bear-market correlation of five safe haven assets during two sample periods, pre-financial crisis (1995–2009) and post-financial crisis (2010–2018). My findings are as follows: First, I find that the empirical bear-market correlations are not explained by multivariate normal and t-distributions. Second, I document that the bear-market correlations of both the Japanese yen and gold show notable changes after the crisis. Third, I estimate a multivariate normal mixture, a multivariate t-distribution mixture, and a generalized dynamic conditional correlation model. I document that these mixture models outperform the dynamic conditional correlation model in most cases. Finally, I discuss the economic impact of failing to capture the bear-market correlation for portfolio optimization. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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