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Quantile Co-Movement in Financial Markets; a Panel Quantile Model with Unobserved Heterogeneity
| Content Provider | Scilit |
|---|---|
| Author | Ando, Tomohiro Bai, Jushan |
| Copyright Year | 2017 |
| Description | Journal: SSRN Electronic Journal This paper introduces a new procedure for analyzing the quantile co-movement of a large number of financial time series based on a large-scale panel data model with factor structures. The proposed method attempts to capture the unobservable heterogeneity of each of the financial time series based on sensitivity to explanatory variables and to the unobservable factor structure. In our model, the common factor structure varies across quantiles and is allowed to be correlated with the explanatory variables. The proposed method also allows for serial dependence and heteroskedasticity, which are common in financial markets.Direct estimation of the model parameters is challenging because of the non-smoothness of the objective function and the large number of parameters. We propose a new data-augmentation strategy for such estimation. We also propose a new model selection criterion for determining the number of common factors. Theoretical properties are also established for the proposed procedure.We apply the method to analyze the returns for over 6,000 international stocks from over 60 countries. The empirical analysis indicates that the common factor structure varies across the quantiles. Furthermore, we find that the common factors for the quantiles and the common factors for the mean are different. |
| Related Links | https://mpra.ub.uni-muenchen.de/88765/1/MPRA_paper_88765.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2953039 |
| ISSN | 10914358 |
| e-ISSN | 15565068 |
| DOI | 10.2139/ssrn.2953039 |
| Journal | SSRN Electronic Journal |
| Language | English |
| Publisher | Elsevier BV |
| Publisher Date | 2017-04-13 |
| Access Restriction | Open |
| Subject Keyword | Journal: SSRN Electronic Journal History and Philosophy of Science |
| Content Type | Text |
| Resource Type | Article |
| Subject | Public Health, Environmental and Occupational Health Psychiatry and Mental Health |
