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Discussion Papers in Statistics and Econometrics, Seminar für Wirtschafts- und Sozialstatistik, Universität Köln >
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http://hdl.handle.net/10419/45359
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| Title: | | Forecasting international stock market correlations: does anything beat a CCC?  |
| Authors: | | Manner, Hans Reznikova, Olga |
| Issue Date: | | 2010 |
| Series/Report no.: | | Discussion papers in statistics and econometrics 7/10 |
| Abstract: | | It is well known that the correlation between financial series varies over time. Here, the forecasting performance of different time-varying correlation models is compared for cross-country correlations of weekly G5 and daily European stock market indices. In contrast to previous studies only the correlation and not the entire covariance matrix is forecasted and multi-step forecasts are considered. The forecast comparison is done by considering statistical and economic criteria. The results suggest that under a statistical criterion time-varying correlation models perform quite well for weekly data, but cannot outperform the constant correlation model for daily data. Considering economic criteria it is hard to beat a constant correlation model. |
| Subjects: | | dynamic conditional correlation regime switching stochastic correlation smooth correlations indirect model comparison portfolio construction |
| JEL: | | C53 G17 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Discussion Papers in Statistics and Econometrics, Seminar für Wirtschafts- und Sozialstatistik, Universität Köln
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