Interdependence between Greece and other European stock markets: A comparison of wavelet and VMD copula, and the portfolio implications

Shahzad, Syed Jawad Hussain, Kumar, Ronald Ravinesh, Ali, Sajid, & Saba, Ameer (2016) Interdependence between Greece and other European stock markets: A comparison of wavelet and VMD copula, and the portfolio implications. Physica A: Statistical Mechanics and its Applications, 457, pp. 8-33.

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Abstract

The interdependence of Greece and other European stock markets and the subsequent portfolio implications are examined in wavelet and variational mode decomposition domain. In applying the decomposition techniques, we analyze the structural properties of data and distinguish between short and long term dynamics of stock market returns. First, the GARCH-type models are fitted to obtain the standardized residuals. Next, different copula functions are evaluated, and based on the conventional information criteria and time varying parameter, Joe-Clayton copula is chosen to model the tail dependence between the stock markets. The short-run lower tail dependence time paths show a sudden increase in comovement during the global financial crises. The results of the long-run dependence suggest that European stock markets have higher interdependence with Greece stock market. Individual country’s Value at Risk (VaR) separates the countries into two distinct groups. Finally, the two-asset portfolio VaR measures provide potential markets for Greece stock market investment diversification.

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ID Code: 94816
Item Type: Journal Article
Refereed: Yes
Additional URLs:
DOI: 10.1016/j.physa.2016.03.048
ISSN: 0378-4371
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Financial Economics (140207)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2016 2016ElsevierB.V.
Copyright Statement: Licensed under the Creative Commons Attribution; Non-Commercial; No-Derivatives 4.0 International. DOI: http://dx.doi.org/10.1016/j.physa.2016.03.048
Deposited On: 14 Apr 2016 00:37
Last Modified: 28 Aug 2016 17:45

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