The dependence structure between Chinese and other major stock markets using extreme values and copulas

Hussain, S and Li, S 2018, 'The dependence structure between Chinese and other major stock markets using extreme values and copulas', International Review of Economics and Finance, vol. 56, pp. 421-437.


Document type: Journal Article
Collection: Journal Articles

Title The dependence structure between Chinese and other major stock markets using extreme values and copulas
Author(s) Hussain, S
Li, S
Year 2018
Journal name International Review of Economics and Finance
Volume number 56
Start page 421
End page 437
Total pages 17
Publisher Elsevier BV
Abstract This study employs the extreme value theory (EVT) and stochastic copulas to investigate the dependence structure between the Chinese stock market and other major stock markets including the US, Canada, UK, Germany, Japan and Australia. Our research reveals that the dependence between the Chinese stock market and the developed markets is low. Furthermore, our study indicates Chinese stock market has stronger dependence with Asia and Europe than the US. Among all 6 pairs, the dependence between Chinese and US stock markets is the lowest and that between China and Australia is the highest. It is also found that US and UK do not have significant upper tail dependence with Chinese stock market and the dependence between China and Japan is strong but has weakened for the lower tail since 2014. Overall, diversification across all six pairs of stock markets is not effective, though the prospect of diversification across China and Japan has improved.
Subject Finance
Keyword(s) Chinese stock market
Copula
Dependence structure
Extreme value theory
DOI - identifier 10.1016/j.iref.2017.12.002
Copyright notice © 2017 Elsevier Inc. All rights reserved.
ISSN 1059-0560
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