This paper seeks to explain time-varying correlations among equity returns. The literature has shown that fundamental and economic factors can explain stock returns or the volatility of markets. Here, panel data analysis is employed to examine whether these factors can also explain the comovement of stock returns. Time-varying correlations among sectoral indexes are estimated using a restricted multivariate threshold GARCH model with dynamic conditional correlation (DCC-MTGARCH) controlling for the asymmetric effects of news and the influence of financial crises. The empirical results from this panel data analysis show that equity return correlations can be explained not only by macroeconomic variables but also by fundamentals within an industry.
- Dynamic conditional correlation
- Equity returns correlations
- Multivariate threshold GARCH
- Panel data analysis
- Risk factors
Alomari, M., Power, D., & Tantisantiwong, N. (2018). Determinants of equity return correlations: A case study of the Amman Stock Exchange. Review of Quantitative Finance and Accounting, 50(1), 33-66. https://doi.org/10.1007/s11156-017-0622-4