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.C. Evidence of a Structural Cause of the Crash of 1987 In the days and months following the stock market crash of 1987, numerous articles by journalists and studies by commissions and academics ascribed the crash to a variety of sources anbsp;...
|Title||:||Linkages Among Asset Markets in the United States|
|Author||:||Parha Deb, Mr. Salim M. Darbar|
|Publisher||:||International Monetary Fund - 1999-11-01|