Article (Scientific journals)
The Dark side of global integration: increasing tail dependance
Cosma, Antonio; Beine, Michel; Vermeulen, Robert John Gerard
2010In Journal of Banking and Finance, 34 (1), p. 184-192
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Keywords :
Comovement Financial integration; Stock markets; Trade integration; Financial integration
Abstract :
[en] We measure stock market coexceedances using the methodology of Cappiello, Gerard and Manganelli <br />(2005, ECB Working Paper 501). This method enables us to measure comovement at each point of the <br />return distribution. First, we construct annual coexceedance probabilities for both lower and upper tail <br />return quantiles using daily data from 1974–2006. Next, we explain these probabilities in a panel gravity <br />model framework. Results show that macroeconomic variables asymmetrically impact stock market <br />comovement across the return distribution. Financial liberalization significantly increases left tail comovement, <br />whereas trade integration significantly increases comovement across all quantiles. Decreasing <br />exchange rate volatility results in increasing lower tail comovement. The introduction of the euro <br />increases comovement across the entire return distribution, thereby significantly reducing the benefits <br />of portfolio diversification within the euro area.
Disciplines :
International economics
Identifiers :
UNILU:UL-ARTICLE-2011-185
Author, co-author :
Cosma, Antonio ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Beine, Michel  ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Vermeulen, Robert John Gerard;  Bank of the Netherlands - Research Department
Language :
English
Title :
The Dark side of global integration: increasing tail dependance
Publication date :
2010
Journal title :
Journal of Banking and Finance
ISSN :
0378-4266
Publisher :
Elsevier Science
Volume :
34
Issue :
1
Pages :
184-192
Peer reviewed :
Peer Reviewed verified by ORBi
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