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Please refer to this blog post for more information. The paper forecasts conditional correlations between three classes of international financial assets, namely stock, bond and foreign exchange.

Two countries are considered, namely Australia and New Zealand. Forecasting will be conducted using three multivariate GARCH models, namely the CCC model [T. Bollerslev, Modelling the coherence in short-run nominal exchange rates: McAleer, Asymptotic theory for a vector ARMA-GARCH model, Econometric Theory 19 —], and VARMA-AGARCH model [M.

Chan, Structure and asymptotic theory for multivariate asymmetric volatility, Econometric Rev. A rolling window technique is used to forecast 1-day ahead conditional correlations. To evaluate the impact of model specification on conditional correlations forecasts, this paper calculates and compares the correlations between conditional correlations forecasts resulted from the three models.

The paper finds the evidence of volatility spillovers and asymmetric effect of negative and positive shock on the conditional variance in most pairs of series. However, it suggests that incorporating volatility spillovers and asymmetric do not contribute to better conditional correlations forecasts.

Modelling the interactions across international stock, bond and foreign exchange markets - EconBiz

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Forecasting conditional correlations in stock, bond and foreign exchange markets

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Mathematics and Forex exchange danmark in Forecasting conditional correlations in stock bond and foreign exchange markets Volume 79, Issue 9MayPages Forecasting conditional correlations in stock, bond and foreign exchange markets.

Author links open the author workspace. Opens the author workspace Opens the author workspace a. Numbers and letters correspond to the affiliation list. Click to expose these in author workspace b. Click to expose these in author workspace Michael McAleer. Click to expose these in author workspace c.

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Click to expose these in author workspace a School of Economics and Commerce, University of Western Australia, 35 Stirling Highway, Crawley, WAAustralia b Faculty of Economics, Indonesian Islamic University, Indonesia c Faculty of Economics, Yokohama National University, Japan. Abstract The paper forecasts conditional correlations between three classes of international financial assets, namely stock, bond and foreign exchange.

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