Re-examination of international bond market dependence: Evidence from a pair copula approach.

The finance literature provides substantial evidence on the dependence between international bond markets across developed and emerging countries. Early works in this area were based on linear models and multivariate GARCH models. However, based on the limitations of these models this paper re-exami...

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Autores: Aikins Abakah, Emmanuel Joel, Addo Jr, Emmanuel, Gil Alana, Luis A., Kumar Tiwari, Aviral
Tipo de recurso: artículo
Fecha de publicación:2021
País:España
Institución:Universidad Francisco de Vitoria
Repositorio:DDFV. Repositorio Institucional de la Universidad Francisco de Vitoria
Idioma:inglés
OAI Identifier:oai:ddfv.ufv.es:10641/2982
Acceso en línea:http://hdl.handle.net/10641/2982
Access Level:acceso abierto
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spelling Re-examination of international bond market dependence: Evidence from a pair copula approach.Aikins Abakah, Emmanuel JoelAddo Jr, EmmanuelGil Alana, Luis A.Kumar Tiwari, AviralThe finance literature provides substantial evidence on the dependence between international bond markets across developed and emerging countries. Early works in this area were based on linear models and multivariate GARCH models. However, based on the limitations of these models this paper re-examines the non-linearity, multivariate and tail dependence structure between government bond markets of the US, UK, Japan, Germany, Canada, France, Italy, Australia and the Eurozone, from January 1970 to February 2019 using ARMA-GARCH based pair- copula models. We find that the bond markets in our sample tend to have both upper tail dependence in terms of positive shocks and lower tail dependence in terms of negative shocks. The estimated C-vine shows Eurozone has the highest average dependency. The D-vine, with optimal chain dependency structure shows the best order of connectedness to be the UK, the USA, Italy, Japan, Eurozone, France, Canada, Germany and Australia. The R-vine copula results underline the complex dynamics of bond market relations existing between the selected economies. The estimated R-vine shows Eurozone, Germany and Australia are the most inter-connected nodes. The multivariate distribution structure (interdependency) of bond markets for all countries were modelled with the C-vine, D-vine and R-vine copulas. In this application, the R-vine copula allows for detailed modelling of all bond markets and hence provides a more accurate goodness of fit and mean square error for the interdependency between all markets. In light of the changing volatility in bond markets, we conduct additional tests using time-varying copulas and find that the dependence structure among the bond markets examined is time-varying with the dynamic dependence parameter plots revealing that the nature of the dependence structure is intense during crisis periods.20212021-01-0120212021-01-01journal articlehttp://purl.org/coar/resource_type/c_6501AMhttp://purl.org/coar/version/c_ab4af688f83e57aainfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10641/2982reponame:DDFV. Repositorio Institucional de la Universidad Francisco de Vitoriainstname:Universidad Francisco de VitoriaInglésengopen accesshttp://purl.org/coar/access_right/c_abf2Atribución-NoComercial-SinDerivadas 3.0 Españahttp://creativecommons.org/licenses/by-nc-nd/3.0/es/info:eu-repo/semantics/openAccessoai:ddfv.ufv.es:10641/29822026-06-11T12:44:57Z
dc.title.none.fl_str_mv Re-examination of international bond market dependence: Evidence from a pair copula approach.
title Re-examination of international bond market dependence: Evidence from a pair copula approach.
spellingShingle Re-examination of international bond market dependence: Evidence from a pair copula approach.
Aikins Abakah, Emmanuel Joel
title_short Re-examination of international bond market dependence: Evidence from a pair copula approach.
title_full Re-examination of international bond market dependence: Evidence from a pair copula approach.
title_fullStr Re-examination of international bond market dependence: Evidence from a pair copula approach.
title_full_unstemmed Re-examination of international bond market dependence: Evidence from a pair copula approach.
title_sort Re-examination of international bond market dependence: Evidence from a pair copula approach.
dc.creator.none.fl_str_mv Aikins Abakah, Emmanuel Joel
Addo Jr, Emmanuel
Gil Alana, Luis A.
Kumar Tiwari, Aviral
author Aikins Abakah, Emmanuel Joel
author_facet Aikins Abakah, Emmanuel Joel
Addo Jr, Emmanuel
Gil Alana, Luis A.
Kumar Tiwari, Aviral
author_role author
author2 Addo Jr, Emmanuel
Gil Alana, Luis A.
Kumar Tiwari, Aviral
author2_role author
author
author
dc.contributor.none.fl_str_mv
description The finance literature provides substantial evidence on the dependence between international bond markets across developed and emerging countries. Early works in this area were based on linear models and multivariate GARCH models. However, based on the limitations of these models this paper re-examines the non-linearity, multivariate and tail dependence structure between government bond markets of the US, UK, Japan, Germany, Canada, France, Italy, Australia and the Eurozone, from January 1970 to February 2019 using ARMA-GARCH based pair- copula models. We find that the bond markets in our sample tend to have both upper tail dependence in terms of positive shocks and lower tail dependence in terms of negative shocks. The estimated C-vine shows Eurozone has the highest average dependency. The D-vine, with optimal chain dependency structure shows the best order of connectedness to be the UK, the USA, Italy, Japan, Eurozone, France, Canada, Germany and Australia. The R-vine copula results underline the complex dynamics of bond market relations existing between the selected economies. The estimated R-vine shows Eurozone, Germany and Australia are the most inter-connected nodes. The multivariate distribution structure (interdependency) of bond markets for all countries were modelled with the C-vine, D-vine and R-vine copulas. In this application, the R-vine copula allows for detailed modelling of all bond markets and hence provides a more accurate goodness of fit and mean square error for the interdependency between all markets. In light of the changing volatility in bond markets, we conduct additional tests using time-varying copulas and find that the dependence structure among the bond markets examined is time-varying with the dynamic dependence parameter plots revealing that the nature of the dependence structure is intense during crisis periods.
publishDate 2021
dc.date.none.fl_str_mv 2021
2021-01-01
2021
2021-01-01
dc.type.none.fl_str_mv journal article
http://purl.org/coar/resource_type/c_6501
AM
http://purl.org/coar/version/c_ab4af688f83e57aa
dc.type.openaire.fl_str_mv info:eu-repo/semantics/article
format article
dc.identifier.none.fl_str_mv http://hdl.handle.net/10641/2982
url http://hdl.handle.net/10641/2982
dc.language.none.fl_str_mv Inglés
eng
language_invalid_str_mv Inglés
language eng
dc.rights.none.fl_str_mv open access
http://purl.org/coar/access_right/c_abf2
Atribución-NoComercial-SinDerivadas 3.0 España
http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.rights.openaire.fl_str_mv info:eu-repo/semantics/openAccess
rights_invalid_str_mv open access
http://purl.org/coar/access_right/c_abf2
Atribución-NoComercial-SinDerivadas 3.0 España
http://creativecommons.org/licenses/by-nc-nd/3.0/es/
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.source.none.fl_str_mv reponame:DDFV. Repositorio Institucional de la Universidad Francisco de Vitoria
instname:Universidad Francisco de Vitoria
instname_str Universidad Francisco de Vitoria
reponame_str DDFV. Repositorio Institucional de la Universidad Francisco de Vitoria
collection DDFV. Repositorio Institucional de la Universidad Francisco de Vitoria
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