Quantile Dependence between the Stock, Bond and Foreign Exchange Markets - Evidence from the UK
Journal article
Hamid, R and Wu, W (2018). Quantile Dependence between the Stock, Bond and Foreign Exchange Markets - Evidence from the UK. Quarterly Review of Economics and Finance. 69, pp. 286-296. https://doi.org/10.1016/j.qref.2018.03.009
Authors | Hamid, R and Wu, W |
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Abstract | In the wake of Brexit, this paper aims to provide a measure for the quantile dependence amongst different financial assets – bond, stock, and currency – within the UK market and their cross–border linkages with the European equity market. We implement a nonparametric estimation method for both the tail and quantile dependence parameters on weekly data over the period 1989-2016 using copula. Our results suggest that the contagion effects between stock and currency markets are limited, even under extreme fluctuations. We also find a weak comovement between currency and bond markets, however, evidence of asymmetry is found in the dependence structure, possibly due to the ‘risk-reward’ scenario of international investors. Finally, our results indicate a weak dependence between stock returns and bond yields, possibly due to the low-yielding gilt and the thirst for income, pushing investors to diversify globally into other financial markets. |
Keywords | Quantile Dependence; Copula; Nonparametric Estimation; Asymmetric Dependence; 14 Economics; 15 Commerce, Management, Tourism And Services; Finance |
Year | 2018 |
Journal | Quarterly Review of Economics and Finance |
Journal citation | 69, pp. 286-296 |
Publisher | Elsevier |
ISSN | 1062-9769 |
Digital Object Identifier (DOI) | https://doi.org/10.1016/j.qref.2018.03.009 |
Web address (URL) | https://www.sciencedirect.com/science/article/abs/pii/S1062976916301053?via%3Dihub |
Publication dates | |
10 Apr 2018 | |
Publication process dates | |
Deposited | 19 Mar 2018 |
Accepted | 18 Mar 2018 |
Accepted author manuscript | License File Access Level Open |
https://openresearch.lsbu.ac.uk/item/86v5y
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