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Dynamic conditional correlation among EU countries: a DCC-MIDAS approach

Javed, Farrukh LU (2012)
Abstract
This paper aims to examine the dynamic conditional correlation structure for European countries. Three major equity markets of Europe, namely, the UK, Germany and France have been used in the analysis. The financial integration was investigated through a time-varying correlation structure. A recently proposed method of DCC-MIDAS (Dynamic Conditional Correlation - Mixed Data Sampling) was implemented to study the integration. The preliminary results for the three countries show that all the parameters are significant at the 5\% level. There are obvious long-term term and short-term components in the correlations. The findings indicate a substantial increase in the correlation for all markets since the introduction of the fixed currency... (More)
This paper aims to examine the dynamic conditional correlation structure for European countries. Three major equity markets of Europe, namely, the UK, Germany and France have been used in the analysis. The financial integration was investigated through a time-varying correlation structure. A recently proposed method of DCC-MIDAS (Dynamic Conditional Correlation - Mixed Data Sampling) was implemented to study the integration. The preliminary results for the three countries show that all the parameters are significant at the 5\% level. There are obvious long-term term and short-term components in the correlations. The findings indicate a substantial increase in the correlation for all markets since the introduction of the fixed currency regime. The relationships between volatility and correlation were also investigated and a significant increase was seen. All the indicators for long- and short-term components turned out to be positive, suggesting volatility and correlation move in the same direction. (Less)
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author
organization
publishing date
type
Working Paper
publication status
submitted
subject
keywords
Correlation, DCC-MIDAS, GARCH, Volatility.
pages
15 pages
language
English
LU publication?
yes
id
db7c4340-a5ce-4b7e-a39a-de10cd65f397 (old id 3172529)
date added to LUP
2012-11-19 09:06:38
date last changed
2016-04-16 12:49:09
@misc{db7c4340-a5ce-4b7e-a39a-de10cd65f397,
  abstract     = {This paper aims to examine the dynamic conditional correlation structure for European countries. Three major equity markets of Europe, namely, the UK, Germany and France have been used in the analysis. The financial integration was investigated through a time-varying correlation structure. A recently proposed method of DCC-MIDAS (Dynamic Conditional Correlation - Mixed Data Sampling) was implemented to study the integration. The preliminary results for the three countries show that all the parameters are significant at the 5\% level. There are obvious long-term term and short-term components in the correlations. The findings indicate a substantial increase in the correlation for all markets since the introduction of the fixed currency regime. The relationships between volatility and correlation were also investigated and a significant increase was seen. All the indicators for long- and short-term components turned out to be positive, suggesting volatility and correlation move in the same direction.},
  author       = {Javed, Farrukh},
  keyword      = {Correlation,DCC-MIDAS,GARCH,Volatility.},
  language     = {eng},
  pages        = {15},
  title        = {Dynamic conditional correlation among EU countries: a DCC-MIDAS approach},
  year         = {2012},
}