Dependence of Stock Returns in Bull and Bear Markets

• Autorzy: Jadran Dobric , Gabriel Frahm , Friedrich Schmid
• Języki publikacji: EN

Abstrakty

EN

Despite of its many shortcomings, Pearson’s rho is often used as an association measure for stock returns. A conditional version of Spearman’s rho is suggested as an alternative measure of association. This approach is purely nonparametric and avoids any kind of model misspecification. We derive hypothesis tests for the conditional rank-correlation coefficients particularly arising in bull and bear markets and study their finite-sample performance by Monte Carlo simulation. Further, the daily returns on stocks contained in the German stock index DAX 30 are analyzed. The empirical study reveals significant differences in the dependence of stock returns in bull and bear markets.

Słowa kluczowe

EN

Bear market; bootstrapping; bull market; conditional Spearman’s rho; copulas; Monte Carlo simulation; Pearson’s rho; stock returns

Kategorie tematyczne

• 62P05: Applications to actuarial sciences and financial mathematics
• 62H20: Measures of association (correlation, canonical correlation, etc.)

• Wydawca: De Gruyter Open
• Czasopismo: Dependence Modeling
• Rocznik: 2013
• Tom: 1
• Strony: 94-110

Daty

otrzymano

2013-10-17

zaakceptowano

2013-12-20

online

2013-12-31

Twórcy

autor

Jadran Dobric

• Credit Risk Control, WGZ BANK AG, Düsseldorf, Germany

autor

Gabriel Frahm

• Chair for Applied Stochastics and Risk Management,
  Helmut Schmidt University, Hamburg, Germany

autor

Friedrich Schmid

• University of Cologne, Germany

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Identyfikatory

DOI

10.2478/demo-2013-0005