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

TY - JOUR

T1 - Determinants of equity return correlations

T2 - A case study of the Amman Stock Exchange

AU - Alomari, Mohammad

AU - Power, David

AU - Tantisantiwong, Nongnuch

N1 - We would like to express our sincere thanks for helpful comments from those who attended the British Accounting and Finance Association Scottish area group conference held at the University of St Andrews, United Kingdom and the Southampton Business School Seminar series. The first author would also like to thank the German Jordanian University for funding which allowed him to undertake this research.

PY - 2018/1

Y1 - 2018/1

N2 - 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.

AB - 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.

KW - Dynamic conditional correlation

KW - Equity returns correlations

KW - Multivariate threshold GARCH

KW - Panel data analysis

KW - Risk factors

UR - https://www.scopus.com/pages/publications/85013119773

U2 - 10.1007/s11156-017-0622-4

DO - 10.1007/s11156-017-0622-4

M3 - Article

SN - 0924-865X

VL - 50

SP - 33

EP - 66

JO - Review of Quantitative Finance and Accounting

JF - Review of Quantitative Finance and Accounting

IS - 1

ER -