【主讲】Cathy Ning (Ryerson University)
【主题】Is the inter- and intra- continental diversification potential disappearing? A vine copula approach
【时间】2017年5月19日 (周五) 15：30-17：00
【地点】上海财经大学经济学院楼402室
【语言】英文
【摘要】Literature has documented asymmetric nonlinear dependence and disappearing diversification benefit in developed stock markets. This leads to a harder time for international diversification. In this paper, we reexamine the co-movements/interdependence of international stock markets from a new perspective. Specifically, we investigate the inter- and intra- continents dependence of developed stock markets in order to identify possibly further diversification potential. To the best of our knowledge, this is the first paper investigating dependence of international stock markets from the perspective of continent level. We use the approach of vine copulas to study the dependence. The advantage of vine copula approach is that it allows for high dimensions and is also flexible in accommodation of different dependence structure in each pairs via a rich variety of bivariate copulas as its building blocks. We use weekly data from countries in North America (US and Canada), Europe (UK, Germany, and France) and East Asia (Japan, Korea, Hong Kong, and Singapore). The vine copula identified overall dependence structure of all pairs considered shows a weaker dependence across different continents than within a continent. We also find that the dependence measured by either the linear correlations or tail dependence is much lower across continents than within the same continent. We further examine the change of dependence before (period 1) and after the 2008 global financial crisis (period 2), though the dependence has generally increased within the same continent in period 2 during and after the crisis, the dependence across continents has only slightly increased in the second period, which is specially so across Asia-Europe and across Asia-North America. Thus the diversification potential within a continent is disappearing but there exists significant intra- continents diversification potential especially between Asia and other continents.
