An equicorrelation measure for equity, bond, foreign exchange and commodity returns
This article provides the first empirical application of the dynamic equicorrelation (DECO) model to a cross-market data set composed of equities, bonds, foreign exchange and commodity returns during 1983--2013. The results reveal that the average cross-market equicorrelation is around 47%, although it is found to be time-varying and mean-reverting. Besides, we display the equicorrelation across markets as a natural way of looking at the DECO dynamics, which overcomes the cumbersome estimation difficulties encountered with multivariate GARCH models. Implications are derived in terms of asset management.
Year of publication: |
2013
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Authors: | Aboura, Sofiane ; Chevallier, Julien |
Published in: |
Applied Economics Letters. - Taylor & Francis Journals, ISSN 1350-4851. - Vol. 20.2013, 18, p. 1618-1624
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Publisher: |
Taylor & Francis Journals |
Saved in:
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