Work detail

A time-varying copula approach to equity market contagion

Author: Mgr. Petra Horáčková
Year: 2016 - summer
Leaders: doc. PhDr. Jozef Baruník Ph.D.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 153
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/152276/
Abstract: The dependence structures in financial markets count among the most frequently
discussed topics in the recent literature. However, no general consensus on modeling of the
cross-market linkages has been reached. This thesis analyses the dependence structure and
contagion in the financial markets in Central and Eastern Europe. Tail dependence, symmetry
and dynamics of the dependence structure are examined. A conditional copula framework
extended by recently developed dynamic generalized autoregressive score (GAS) model is used
to capture the conditional time-varying joint distribution of stock market returns. Considering
the Czech, Croatian, Hungarian, Austrian and Polish stock market indices over the 2005-2012
period, we find that time-varying Student's t GAS copula provides the best fit. The results show,
that the degree of dependence increases substantially during the global financial crisis, having
a direct impact on portfolio optimization.
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