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Dependence and contagion between asset prices in Poland and abroad. A copula approach

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Abstract
We investigate the dependence structure between Polish and foreign financial assets, including stocks, bonds and foreign exchange. Our interest is in the importance of global factors for asset valuation and on the strength of financial contagion. We work in the copula framework, which offers a full description of the dependence structure. Importantly, we assess many copula families and pay special attention to the testing procedure thereof. Polish equities, currency and to some extent long-term sovereign bonds exhibit economically significant tail dependence, while short-term bonds appear relatively unaffected. Symmetric tail behaviour characterises the majority of asset pairs, though we also find significant asymmetries in a number of cases, with assets more likely to post large losses when global conditions significantly deteriorate, rather than to gain when they improve.

Suggested Citation

  • Michał Adam & Piotr Bańbuła & Michał Markun, 2013. "Dependence and contagion between asset prices in Poland and abroad. A copula approach," NBP Working Papers 169, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:169
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    File URL: https://static.nbp.pl/publikacje/materialy-i-studia/169_en.pdf
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    Cited by:

    1. Nguyen, Thu Thuy & Tran, T.N. & Nguyen, V.C., 2020. "Oil price shocks against stock return of oil- and gas-related firms in the economic depression: A new evidence from a copula approach," OSF Preprints 4cm7b, Center for Open Science.
    2. Christian Bucio Pacheco & Luis Villanueva & Raúl de Jesús Gutiérrez, 2021. "Dependence in the Banking Sector of the United States and Mexico: A Copula Approach," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 16(TNEA), pages 1-23, Septiembr.
    3. Zorgati, Imen & Lakhal, Faten & Zaabi, Elmoez, 2019. "Financial contagion in the subprime crisis context: A copula approach," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 269-282.

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    More about this item

    Keywords

    Copulas; Dependence; Tail dependence coefficients; Contagion; Asset classes;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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