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A time-varying copula approach to equity market contagion
Horáčková, Petra ; Baruník, Jozef (advisor) ; Buzková, Petra (referee)
The dependence structures in financial markets count among the most frequently discussed topics in the recent literature. However, no general consensus on modeling of the cross-market linkages has been reached. This thesis analyses the dependence structure and contagion in the financial markets in Central and Eastern Europe. Tail dependence, symmetry and dynamics of the dependence structure are examined. A conditional copula framework extended by recently developed dynamic generalized autoregressive score (GAS) model is used to capture the conditional time-varying joint distribution of stock market returns. Considering the Czech, Croatian, Hungarian, Austrian and Polish stock market indices over the 2005-2012 period, we find that time-varying Student's t GAS copula provides the best fit. The results show, that the degree of dependence increases substantially during the global financial crisis, having a direct impact on portfolio optimization.
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A time-varying copula approach to equity market contagion
Horáčková, Petra ; Baruník, Jozef (advisor) ; Buzková, Petra (referee)
The dependence structures in financial markets count among the most frequently discussed topics in the recent literature. However, no general consensus on modeling of the cross-market linkages has been reached. This thesis analyses the dependence structure and contagion in the financial markets in Central and Eastern Europe. Tail dependence, symmetry and dynamics of the dependence structure are examined. A conditional copula framework extended by recently developed dynamic generalized autoregressive score (GAS) model is used to capture the conditional time-varying joint distribution of stock market returns. Considering the Czech, Croatian, Hungarian, Austrian and Polish stock market indices over the 2005-2012 period, we find that time-varying Student's t GAS copula provides the best fit. The results show, that the degree of dependence increases substantially during the global financial crisis, having a direct impact on portfolio optimization.
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Essays in Financial Econometrics
Avdulaj, Krenar ; Baruník, Jozef (advisor) ; Di Matteo, Tiziana (referee) ; Kočenda, Evžen (referee) ; Witzany, Jiří (referee)
vi Abstract Proper understanding of the dependence between assets is a crucial ingredient for a number of portfolio and risk management tasks. While the research in this area has been lively for decades, the recent financial crisis of 2007-2008 reminded us that we might not understand the dependence properly. This crisis served as catalyst for boosting the demand for models capturing the dependence structures. Reminded by this urgent call, literature is responding by moving to nonlinear de- pendence models resembling the dependence structures observed in the data. In my dissertation, I contribute to this surge with three papers in financial econo- metrics, focusing on nonlinear dependence in financial time series from different perspectives. I propose a new empirical model which allows capturing and forecasting the conditional time-varying joint distribution of the oil - stocks pair accurately. Em- ploying a recently proposed conditional diversification benefits measure that con- siders higher-order moments and nonlinear dependence from tail events, I docu- ment decreasing benefits from diversification over the past ten years. The diver- sification benefits implied by my empirical model are, moreover, strongly varied over time. These findings have important implications for asset allocation, as the benefits of...
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