Linkages Among Asset Markets in the United States Tests in a Bivariate GARCH Framework

25 Pages Posted: 15 Feb 2006

See all articles by Salim M. Darbar

Salim M. Darbar

International Monetary Fund (IMF)

Partha Deb

City University of New York, CUNY Hunter College - Department of Economics

Date Written: November 1999

Abstract

This paper develops a bivariate GARCH model that allows for time-varying conditional correlations and simultaneous testing of two Granger-causal linkages: the impact of return volatility in a market on intermarket correlation and the impact of return volatility in one market on the volatility of another. Using daily data from stock, bond, currency, and commodity markets in the United States, the paper finds evidence of each form of linkage. Furthermore, the conditional correlations change over time and exhibit considerable persistence. The estimated time-varying conditional correlations provide insight into the nature of the stock market crash of 1987.

Keywords: Logistic Exponential GARCH conditional correlation Granger causality

JEL Classification: C32 C51 G14

Suggested Citation

Darbar, Salim M. and Deb, Partha, Linkages Among Asset Markets in the United States Tests in a Bivariate GARCH Framework (November 1999). IMF Working Paper, Vol. , pp. 1-25, 1999. Available at SSRN: https://ssrn.com/abstract=880685

Salim M. Darbar (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Partha Deb

City University of New York, CUNY Hunter College - Department of Economics ( email )

695 Park Avenue
New York, NY 10021
United States

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