Volatility dependence structure between the Mexican Stock Exchange and the World Capital Market

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Date

1 septembre 2015

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info:eu-repo/semantics/openAccess


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volatility dependence Mexican Stock Exchange World Capital Market multivariate GARCH copula analysis


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Francisco López Herrera et al., « Volatility dependence structure between the Mexican Stock Exchange and the World Capital Market », Investigación económica, ID : 10670/1.wq6v17


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This paper studies the integration of the Mexican Stock Exchange (MSE) into the World Capital Market (WCM). We detect a long-run equilibrium relationship, despite the effects of structural breaks associated to different financial crises during our period of analysis (1987-2012). The analytical approach begins with the estimation of a bivariate VECM in the mean, including several dummy variables that capture the main crisis episodes that took place during the estimation period. Next, we specify a VARMA-GARCH model with Dynamic Conditional Correlation, and, finally, we fit a Clayton copula to returns, conditional on two volatility regimes (low and high), in order to further understand the nature of their dependence structure.

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