Cross-market index with Factor-DCC

Chevallier, Julien; Aboura, Sofiane

Chevallier, Julien; Aboura, Sofiane (2014), Cross-market index with Factor-DCC, Economic Modelling, 40, p. 158–166. 10.1016/j.econmod.2014.04.001

Type

Article accepté pour publication ou publié

Date

2014-06

Journal name

Economic Modelling

Volume

Publisher

Elsevier

Pages

158–166

Publication identifier

10.1016/j.econmod.2014.04.001

Metadata

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Author(s)

Chevallier, Julien

Aboura, Sofiane
Dauphine Recherches en Management [DRM]

Abstract (EN)

This paper proposes a new empirical methodology for computing a cross-market index – coined CMI – based on the Factor DCC-model. This approach solves both problems of treating high-dimensional data and estimating time-varying conditional correlations. We provide an application to a multi-asset market data composed of equities, bonds, foreign exchange rates and commodities during 1983–2013. This new methodology may be attractive to asset managers, since it provides a simple way of constructing passive portfolios customized on any asset class

Subjects / Keywords

Cross-market index; Factor-DCC; Asset management

JEL

C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
G01 - Financial Crises
F15 - Economic Integration