Dependence of Stock Returns in Bull and Bear Markets
Despite of its many shortcomings, Pearson’s rho is often used as an association measure for stock returns. A conditional version of Spearman’s rho is suggested as an alternative measure of association. This approach is purely nonparametric and avoids any kind of model misspecification. We derive hyp...
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| Format: | Article |
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De Gruyter
2013-01-01
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| Series: | Dependence Modeling |
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| Online Access: | https://doi.org/10.2478/demo-2013-0005 |
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doaj-f499f1f6933547a485245907273429cb2021-10-02T19:18:26ZengDe GruyterDependence Modeling2300-22982013-01-01120139411010.2478/demo-2013-0005demo-2013-0005Dependence of Stock Returns in Bull and Bear MarketsDobric Jadran0Frahm Gabriel1Schmid Friedrich2Credit Risk Control, WGZ BANK AG, Düsseldorf, GermanyChair for Applied Stochastics and Risk Management, Helmut Schmidt University, Hamburg, GermanyUniversity of Cologne, GermanyDespite of its many shortcomings, Pearson’s rho is often used as an association measure for stock returns. A conditional version of Spearman’s rho is suggested as an alternative measure of association. This approach is purely nonparametric and avoids any kind of model misspecification. We derive hypothesis tests for the conditional rank-correlation coefficients particularly arising in bull and bear markets and study their finite-sample performance by Monte Carlo simulation. Further, the daily returns on stocks contained in the German stock index DAX 30 are analyzed. The empirical study reveals significant differences in the dependence of stock returns in bull and bear markets.https://doi.org/10.2478/demo-2013-0005bear marketbootstrappingbull marketconditional spearman’s rhocopulasmonte carlo simulationpearson’s rhostock returns62h2062p05 |
| collection |
DOAJ |
| language |
English |
| format |
Article |
| sources |
DOAJ |
| author |
Dobric Jadran Frahm Gabriel Schmid Friedrich |
| spellingShingle |
Dobric Jadran Frahm Gabriel Schmid Friedrich Dependence of Stock Returns in Bull and Bear Markets Dependence Modeling bear market bootstrapping bull market conditional spearman’s rho copulas monte carlo simulation pearson’s rho stock returns 62h20 62p05 |
| author_facet |
Dobric Jadran Frahm Gabriel Schmid Friedrich |
| author_sort |
Dobric Jadran |
| title |
Dependence of Stock Returns in Bull and Bear
Markets |
| title_short |
Dependence of Stock Returns in Bull and Bear
Markets |
| title_full |
Dependence of Stock Returns in Bull and Bear
Markets |
| title_fullStr |
Dependence of Stock Returns in Bull and Bear
Markets |
| title_full_unstemmed |
Dependence of Stock Returns in Bull and Bear
Markets |
| title_sort |
dependence of stock returns in bull and bear
markets |
| publisher |
De Gruyter |
| series |
Dependence Modeling |
| issn |
2300-2298 |
| publishDate |
2013-01-01 |
| description |
Despite of its many shortcomings, Pearson’s rho is often used
as an association measure for stock returns. A conditional
version of Spearman’s rho is suggested as an alternative
measure of association. This approach is purely nonparametric
and avoids any kind of model misspecification. We derive
hypothesis tests for the conditional rank-correlation coefficients
particularly arising in bull and bear markets and study
their finite-sample performance by Monte Carlo simulation.
Further, the daily returns on stocks contained in the German
stock index DAX 30 are analyzed. The empirical study reveals
significant differences in the dependence of stock returns in
bull and bear markets. |
| topic |
bear market bootstrapping bull market conditional spearman’s rho copulas monte carlo simulation pearson’s rho stock returns 62h20 62p05 |
| url |
https://doi.org/10.2478/demo-2013-0005 |
| work_keys_str_mv |
AT dobricjadran dependenceofstockreturnsinbullandbearmarkets AT frahmgabriel dependenceofstockreturnsinbullandbearmarkets AT schmidfriedrich dependenceofstockreturnsinbullandbearmarkets |
| _version_ |
1716847398347603968 |