The influence of past stock price movements on volatilities and correlations is essential for understanding diversification and contagion in financial markets. We develop a model that makes the influence of past returns on volatilities and correlations explicit. Employing information about...

We propose a new asset price model in continuous time where correlations and volatilities are functions of the current state of the market. The state of the market is based on a window of past asset realisations, the length of this window being a measure for the memory of the market. The...

Dynamic average correlations of stock returns are predicted by the volatility of the market excess return and moving average returns of value, size and momentum portfolios. While the influence of market volatility on average correlation is well-known, the role of value, size and momentum appears...