CREATES Seminar: Juan Carlos Escanciano, Indiana University, Bloomington

Title: Measuring Nonlinear Dependence and Persistence: Asset Market Linkages and Tail Risk

Info about event

Time

Thursday 1 June 2017,  at 14:15 - 15:15

Location

Fuglesangs Allé 4, 8210 Aarhus V, building 2630(K), room 101

Organizer

Anders Kock

CREATES arranges seminars on a regular basis, normally every Thursday. The speakers come from worldwide universities and other research institutions - and from CREATES itself.

Speaker: Juan Carlos Escanciano, Indiana University, Bloomington

Title:  Measuring Nonlinear Dependence and Persistence: Asset Market Linkages and Tail Risk (with Javier Hualde, Universidad Pública de Navarra)

Abstract: Traditional measures of persistence in time series are typically based on correlations or periodograms. These are adequate in many circumstances but in others, like in measuring tail risk, might be inappropriate. In the present paper we propose new nonparametric cumulative measures of dependence and show they characterize nonparametric persistence. We propose simple estimates for these measures and establish their limiting properties. We employ the proposed methods to analyze the persistence properties of some of the major international stock market indices during and after the 2007-2009 financial crisis. Our results uncover a leading role of US and London in international diversification. Tail dependence, as quantified with the new measures, is more informative and more robust than the popular Marginal Expected Shortfall for the US, and more persistent than mean dependence. We find an ubiquitous nonlinear persistence in conditional variance across all markets that is not explained by popular parametric models. Market crashes also show substantial persistence.

Organizer: Associate Professor Anders Bredahl Kock

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