Abstract
This paper assesses the linkages between the most important U.S.
financial asset classes (stocks, bonds, T-bills and gold) during periods
of financial turmoil. Our results have potentially important implications
for strategic asset allocation and pension fund management.
We use multivariate extreme value theory to estimate the exposure of
one asset class to extreme movements in the other asset classes. By
applying structural break tests to those measures we study to what
extent linkages in extreme asset returns and volatilities are changing
over time. Univariate results andch bivariate comovement results exhibit
significant breaks in the 1970s and 1980s corresponding to the
turbulent times of e.g. the oil shocks, Volcker’s presidency of the Fed
or the stock market crash of 1987.
financial asset classes (stocks, bonds, T-bills and gold) during periods
of financial turmoil. Our results have potentially important implications
for strategic asset allocation and pension fund management.
We use multivariate extreme value theory to estimate the exposure of
one asset class to extreme movements in the other asset classes. By
applying structural break tests to those measures we study to what
extent linkages in extreme asset returns and volatilities are changing
over time. Univariate results andch bivariate comovement results exhibit
significant breaks in the 1970s and 1980s corresponding to the
turbulent times of e.g. the oil shocks, Volcker’s presidency of the Fed
or the stock market crash of 1987.
Original language | English |
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Place of Publication | Utrecht |
Publisher | UU USE Tjalling C. Koopmans Research Institute |
Number of pages | 49 |
Publication status | Published - May 2009 |
Publication series
Name | Discussion Paper Series / Tjalling C. Koopmans Research Institute |
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No. | 09 |
Volume | 09 |
ISSN (Electronic) | 2666-8238 |
Keywords
- Flight to quality
- financial market distress
- extreme value theory