CMStatistics 2016: Start Registration
View Submission - CFE
A1315
Title: The joint distribution of domestic indexes: An approach using conditional copulas Authors:  Susan Orbe - University of the Basque Country (Spain)
Jone Ascorbebeitia - University of the Basque Country (Spain) [presenting]
Eva Ferreira - University of the Basque Country (Spain)
Abstract: It is well known that the comovements between portfolios are time-varying. Our interest is to detect whether the comovements variation between domestic indexes can be explained by some global risk factors. Concretely, we will study the dependence of EuroStoxx. Moreover, we are interested in measures of dependence beyond linear Pearson's correlation. This coefficient suits for normal variables, but financial variables have more complicated distributions. To overcome this fact, we propose the use of copulas to analyze the relation between domestic European indexes, conditional to the Eurostoxx. The use of copulas allows us to model the dependence better than with elliptic distributions. We estimate conditional copulas using nonparametric methods to obtain the joint probability distribution function between indexes. This method allows us to relate daily data with monthly data in a very simple manner, and therefore to relate stock indexes with macroeconomic variables such as inflation or GDP. We will measure the dependence and the conditional dependence using the Kendall's tau. We provide a statistic to test the significance of tau and its empirical distribution using jacknife.