Volatility Threshold Dynamic Conditional Correlations: An International Analysis

Maria Kasch () and Massimiliano Caporin
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Maria Kasch: University of Bonn

No 65, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: We extend the Dynamic Conditional Correlation multivariate GARCH specification to investigate the dynamic contemporaneous relationship between correlations and variances of the underlying assets. We present a generalization of the DCC model where the dynamic behavior depends on the assets variances through a threshold structure. Our purpose is to analyze the behavior of correlations in periods of high volatility. The application of the proposed specification to a sample of markets heterogeneous in the levels of their development allows the identification of market pairs whose correlations show low sensitivity to high underlying volatility.

Keywords: dynamic correlations; thresholds; volatility thresholds; spillovers (search for similar items in EconPapers)
JEL-codes: C50 F37 G11 G15 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2008
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (5)

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Journal Article: Volatility Threshold Dynamic Conditional Correlations: An International Analysis (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0065

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