A0906
Title: US banking returns and copper global price: A DCC-GARCH-MIDAS approach
Authors: Giovanni De Luca - University of Naples Parthenope (Italy)
Giorgia Rivieccio - Parthenope University (Italy)
Michele Mario Ippolito - University of Naples Parthenope (Italy) [presenting]
Abstract: The purpose is to link the long-run correlation component of daily US banking returns to monthly copper global prices using the dynamic conditional correlation-MIDAS (DCC-MIDAS) framework. The DCC-MIDAS connects the DCC specification to the GARCH-MIDAS framework, where a short-run term is a GARCH component that moves around a long-run term driven by copper global prices computed over a monthly period. Findings highlight a strong negative influence of copper global price on US banking returns long-run volatility improving forecasts. The contribution to the literature is twofold. Firstly, taking into account the monthly copper price, which is heavily influenced by several structural breakdowns, the volatility of US banking returns is effectively depicted. Secondly, a measure of the dynamic correlations is provided, also in the tails, of the short-run US banking returns around the time-varying long-run correlations.
