Determinants of equity return correlations: A case study of the Amman Stock Exchange

Mohammad Alomari (Lead / Corresponding author), David Power, Nongnuch Tantisantiwong

    Research output: Contribution to journalArticlepeer-review

    3 Citations (Scopus)
    182 Downloads (Pure)

    Abstract

    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.
    Original languageEnglish
    Pages (from-to)33-66
    Number of pages34
    JournalReview of Quantitative Finance and Accounting
    Volume50
    Issue number1
    Early online date18 Feb 2017
    DOIs
    Publication statusPublished - Jan 2018

    Keywords

    • Dynamic conditional correlation
    • Equity returns correlations
    • Multivariate threshold GARCH
    • Panel data analysis
    • Risk factors

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