Time-varying dependence structures of equity markets of China, ASEAN and the USA

ABSTRACT

Popular time-varying Copulas are used to analyse the dependence structure between the CSI 300 index return, the S&P 300 index return and the Association of South East Asian Nations (ASEAN) 80 index return. Results show that these three types of stock index returns have obvious time-varying characteristics. The US sub-prime mortgage crisis has strengthened the correlation among the three-stock index returns, whereas the dependence between China and the ASEAN stock markets is more sensitive to the financial crisis. The time-varying features of the extreme dependence risk between China-ASEAN and China-US are very different.

KEYWORDS:

• Copula models
• time-varying
• dependence structure
• equity markets

JEL CODES:

• C32
• F36
• F42

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The details of the marginal distributions and tests for the existence of the time-varying dependence are available upon request from the authors.

² All the lag orders in the VAR model are set at one in this article and all the VAR models are smooth.

³ Impulse responses showed no significant changes before the 50th period.

⁴ Impulse response showed no significant changes before the 50th period.

Additional information

Funding

This work was performed under a grant from the Hubei University of Medicine [2015QDJRW03].