All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC
ralph lauren polo

Marcelo Brutti Righi and Paulo Sergio Ceretta
''Analysis of the Tail Dependence Structure in the Global Markets: A Pair Copula Construction Approach''
( 2012, Vol. 32 No.2 )
In this paper we estimated pair copula constructions (PCC) for three sets of markets: developed, Latin emerging and Asia-Pacific emerging. To that, we used daily prices from January 2003 to November 2011, totaling 1872 observations. After, we estimated the lower and upper tail dependence for each bivariate relationship, comparing the three sets of markets. The results allow concluding that there are some discrepancies in the dependence of the lower and upper tails. The Asia-Pacific markets obtained the great general absolute and tail dependences. The results reinforced the need for a correct risk management in the case of international portfolios due to the fact that the tails generally represent extreme events, as crisis for example, which can lead to deep losses periods occasioned by eventual contagions caused by the tail dependence among the markets. Further, the diversification must be done properly, with optimization process that consider this dependence in the extreme values.
Keywords: Tail Dependence, Pair Copula Construction, Risk Management, Global Markets
JEL: C0 - Mathematical and Quantitative Methods: General
G0 - Financial Economics: General
Manuscript Received : Jan 10 2012 Manuscript Accepted : Apr 09 2012

  This abstract has been downloaded 424 times                The Full PDF of this paper has been downloaded 87994 times