A revisit to the dependence structure between the stock and foreign exchange markets: A dependence-switching copula approach

作者：Wang Yi Chiuan; Wu Jyh Lin^*; Lai Yi Hao

来源：Journal of Banking & Finance, 2013, 37(5): 1706-1719.

DOI：10.1016/j.jbankfin.2013.01.001

• Dependence-switching copula
• Tail dependence
• Systemic risk
• Portfolio rebalancing
• Return chasing

This paper develops a dependence-switching copula model to examine dependence and tail dependence for four different market statuses, namely, rising-stocks/appreciating-currency, falling-stocks/depreciating-currency, rising-stocks/depreciating-currency, and falling-stocks/appreciating-currency. The model is then applied to daily stock returns and exchange rate changes for six major industrial countries over the 1990-2010 period. The dependence and tail dependence among the above four market statuses are asymmetric for most countries in the negative correlation regime, but symmetric in the positive correlation regime. These results enrich the findings in the existing literature and suggest that analyzing cross-market linkages within a time-invariant copula framework may not be appropriate.

• 出版日期2013-5
• 单位中山大学