Yfanti_JIFMIM 2021 On the Economic fundamentals behind the Dynamic Equicorrelations among Asset classes Global evidence from Equities, Real estate, and Commodities (1).pdf (3.1 MB)
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On the economic fundamentals behind the dynamic equicorrelations among asset classes: Global evidence from equities, real estate, and commodities

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journal contribution
posted on 14.10.2021, 08:53 by Menelaos Karanasos, Stavroula YfantiStavroula Yfanti
We reveal the macroeconomic determinants of the dynamic correlations between three global asset markets: equities, real estate, and commodities. Conditional equicorrelations, computed by the GJR-GARCH-DECO model, are explained by the macro-financial proxies of economic policy and financial uncertainty, credit conditions, economic activity, business and consumer confidence, and geopolitical risk. Our results suggest that elevated cross-asset correlations are associated with higher uncertainty, tighter credit conditions, and lower geopolitical risk, while lower correlations are related to stronger economic activity, business, and consumer confidence. We further focus on economic policy uncertainty (EPU) as a potent catalyst of the asset markets integration process and conclude that EPU magnifies all macro-effects across all correlations. Lastly, we investigate the global financial crisis effect on the time-varying impact of the correlations’ macro-drivers. The crisis structural break amplifies the influence that all determinants exert on the evolution of correlations apart from the geopolitical risk upshot, which is alleviated after the crisis advent.

History

School

  • Business and Economics

Department

  • Economics

Published in

Journal of International Financial Markets, Institutions and Money

Volume

74

Publisher

Elsevier

Version

AM (Accepted Manuscript)

Rights holder

© Elsevier

Publisher statement

This paper was accepted for publication in the journal Journal of International Financial Markets, Institutions and Money and the definitive published version is available at https://doi.org/10.1016/j.intfin.2021.101292

Acceptance date

06/01/2021

Publication date

2021-01-13

Copyright date

2021

ISSN

1042-4431

Language

en

Depositor

Dr Stavroula Yfanti. Deposit date: 14 October 2021

Article number

101292