Government bonds and stock market volatility: A Multivariate GARCH Analysis
| Autor: | Aliaksei Aliakseyeu |
|---|---|
| Rok: | 2016 - letní |
| Vedoucí: | prof. Roman Horváth Ph.D. |
| Konzultant: | |
| Typ práce: | Diplomová Ekonomická teorie |
| Jazyk: | Anglicky |
| Stránky: | 78 |
| Ocenění: | |
| Odkaz: | https://is.cuni.cz/webapps/zzp/detail/137335/ |
| Abstrakt: | The correlation between stock market returns and changes in bond market yields are of big interest among investors because this indicator helps them allocate their assets and diversify investment risk more effectively. An investor should keep track of development of the economies of individual countries, understand the causes of dissimilarities in the correlations among them and take these differences into account for successful international financial investment. The current author contributes to the existing researches by the modeling of stock-bond market co-movements using the updated datasets with focus on Central European countries and differences in public debt levels. The paper contains the empirical analysis of stock and bond market returns conditional correlations, modeled by the use of the Asymmetric Generalized Dynamic Conditional Correlation (AG-DCC) Generalized Autoregressive Conditional Heteroskedasticity (GARCH) specification, for nine Western and Central European countries (the United Kingdom, Germany, France, Spain, Portugal, Italy, Czech Republic, Poland and Hungary) that differ both by their geographic locations and economic development. The main distinctions in the correlations are observed during the European sovereign debt crisis. The three types of development are distinguished: 1) correlation noticeably increases (the United Kingdom, Germany, France), 2) it decreases and becomes negative(Spain, Portugal, Italy), 3) it stays at the same level as before the crisis (Czech Republic, Poland, Hungary). As the result the countries are divided into three corresponding groups. The differences in correlations may be partly explained by economic interdependence between the countries, their economical maturity and stability and public debt levels in particular. The inferences help to enhance the understanding of development of stock-bond market returns correlations which may lead to more effective decision making on investments, but they are not robust though: to make them more statistically objective more countries should be analyzed. |
