Comovements of Different Asset Classes During Market Stress

J. Piplack, S. Straetmans

    Research output: Working paperAcademic

    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.
    Original languageEnglish
    Place of PublicationUtrecht
    PublisherUU USE Tjalling C. Koopmans Research Institute
    Number of pages49
    Publication statusPublished - May 2009

    Publication series

    NameDiscussion Paper Series / Tjalling C. Koopmans Research Institute
    No.09
    Volume09
    ISSN (Electronic)2666-8238

    Keywords

    • Flight to quality
    • financial market distress
    • extreme value theory

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