Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171902
Authors: 
Fink, Holger
Klimova, Yulia
Czado, Claudia
Stöber, Jakob
Year of Publication: 
2017
Citation: 
[Journal:] Econometrics [ISSN:] 2225-1146 [Volume:] 5 [Year:] 2017 [Issue:] 1 [Pages:] 1-38
Abstract: 
For nearly every major stock market there exist equity and implied volatility indices. These play important roles within finance: be it as a benchmark, a measure of general uncertainty or a way of investing or hedging. It is well known in the academic literature that correlations and higher moments between different indices tend to vary in time. However, to the best of our knowledge, no one has yet considered a global setup including both equity and implied volatility indices of various continents, and allowing for a changing dependence structure. We aim to close this gap by applying Markov-switching R-vine models to investigate the existence of different, global dependence regimes. In particular, we identify times of 'normal' and 'abnormal' states within a data set consisting of North-American, European and Asian indices. Our results confirm the existence of joint points in a time at which global regime switching between two different R-vine structures takes place.
Subjects: 
regular vine copulas
Markov switching
implied volatility index
equity index
global dependence regimes
JEL: 
C58
C52
C10
G10
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Article
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