Assessing some stylized facts about financial market indexes: a Markov copula approach

被引:3
作者
Silva Filho, Osvaldo Candido [1 ]
Ziegelmann, Flavio Augusto [2 ]
机构
[1] Univ Catolica Brasilia, Grad Program Econ, Brasilia, DF, Brazil
[2] Univ Fed Rio Grande do Sul, Dept Stat, Porto Alegre, RS, Brazil
关键词
Copulas; Markov switching; Tail dependence; Time-varying parameters;
D O I
10.1108/JES-06-2012-0080
中图分类号
F [经济];
学科分类号
02 [经济学];
摘要
Purpose - The aim of this paper is to measure and evaluate the relationship between returns-volatility and trading volume and returns and volatility of financial market indexes using time-varying copulas. Design/methodology/approach - The time dynamic dependence parameter is allowed to evolve according to a restricted ARMA-type equation which includes a constant term that is driven by a hidden two-state first-order Markov chain. Findings - In using this time dynamics in conjunction with non-elliptical distribution functions and tail dependence measure, the authors are allowing for (and focusing on) non-linearities in the returns-volume-volatility relationship. The results support the assumption that current trading volume provides information about future volatility as well as that there is a negative relationship between returns and their volatilities in financial market indexes. Originality/value - The authors provide an interesting empirical interpretation for the regimes the authors have identified: in the high dependence regime the sequential information arrival hypothesis and/or noise trading hypothesis are valid, consequently future volatility prediction is possible and persistent but does not last indefinitely; in the low dependence regime, the future volatility prediction is more unlikely to occur, since both trading volume and return negatives have a low (near zero) relation with future volatility.
引用
收藏
页码:253 / +
页数:20
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