An equicorrelation measure for equity, bond, foreign exchange and commodity returns
Aboura, Sofiane; Chevallier, Julien (2013), An equicorrelation measure for equity, bond, foreign exchange and commodity returns, Applied Economics Letters, 20, 18, p. 1618-1624. http://dx.doi.org/10.1080/13504851.2013.829192
TypeArticle accepté pour publication ou publié
Journal nameApplied Economics Letters
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Abstract (EN)This article provides the first empirical application of the dynamic equicorrelation (DECO) model to a cross-market data set composed of equities, bonds, foreign exchange and commodity returns during 1983–2013. The results reveal that the average cross-market equicorrelation is around 47%, although it is found to be time-varying and mean-reverting. Besides, we display the equicorrelation across markets as a natural way of looking at the DECO dynamics, which overcomes the cumbersome estimation difficulties encountered with multivariate GARCH models. Implications are derived in terms of asset management.
Subjects / KeywordsDECO; cross-market; equity; bonds; foreign exchange; commodities
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