Re-examination of risk-return dynamics in international equity markets and the role of policy uncertainty, geopolitical risk and VIX: Evidence using Markov-switching copulas
This study re-examines the empirical relationship between risk and return from 1994m12 to 2020m08 in fifteen international equity markets employing the novel time-varying Markov switching copula models. We provide first-time insightful evidence of time-varying Markov tail dependence structure and dy...
| Authors: | , , , |
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| Format: | article |
| Publication Date: | 2022 |
| Country: | España |
| Institution: | Universidad de Navarra |
| Repository: | Dadun. Depósito Académico Digital de la Universidad de Navarra |
| Language: | English |
| OAI Identifier: | oai:dadun.unav.edu:10171/63766 |
| Online Access: | https://hdl.handle.net/10171/63766 |
| Access Level: | Open access |
| Keyword: | Risk-return Time-varying Markov-switching copulas Stock markets Uncertainty |
| Summary: | This study re-examines the empirical relationship between risk and return from 1994m12 to 2020m08 in fifteen international equity markets employing the novel time-varying Markov switching copula models. We provide first-time insightful evidence of time-varying Markov tail dependence structure and dynamics between risk and return in international equity markets. Results show that the dependence structure is positive for USA, UK, Germany, Italy, Brazil, Australia, Taiwan, Canada, Mexico, Japan, France and South Africa and negative for Singapore, India, Japan and China. Finally, we document the effects of policy uncertainty, geopolitical risk and VIX conditional on different markets states. |
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