IDEAS home Printed from https://ideas.repec.org/a/eee/phsmap/v436y2015icp338-350.html
   My bibliography  Save this article

A wavelet based approach to measure and manage contagion at different time scales

Author

Listed:
  • Berger, Theo

Abstract

We decompose financial return series of US stocks into different time scales with respect to different market regimes.

Suggested Citation

  • Berger, Theo, 2015. "A wavelet based approach to measure and manage contagion at different time scales," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 436(C), pages 338-350.
    • Handle: RePEc:eee:phsmap:v:436:y:2015:i:c:p:338-350
    DOI: 10.1016/j.physa.2015.05.053
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378437115004689
    Download Restriction: Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000
    File URL: https://libkey.io/10.1016/j.physa.2015.05.053?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andrew J. Patton, 2004. "On the Out-of-Sample Importance of Skewness and Asymmetric Dependence for Asset Allocation," Journal of Financial Econometrics, Oxford University Press, vol. 2(1), pages 130-168.
    2. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    3. Iolanda Lo Cascio, 2007. "Wavelet Analysis and Denoising: New Tools for Economists," Working Papers 600, Queen Mary University of London, School of Economics and Finance.
    4. Andrew Ang & Geert Bekaert, 2002. "International Asset Allocation With Regime Shifts," The Review of Financial Studies, Society for Financial Studies, vol. 15(4), pages 1137-1187.
    5. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
    6. François Longin & Bruno Solnik, 2001. "Extreme Correlation of International Equity Markets," Journal of Finance, American Finance Association, vol. 56(2), pages 649-676, April.
    7. Fernández-Macho, Javier, 2012. "Wavelet multiple correlation and cross-correlation: A multiscale analysis of Eurozone stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(4), pages 1097-1104.
    8. Victor DeMiguel & Lorenzo Garlappi & Raman Uppal, 2009. "Optimal Versus Naive Diversification: How Inefficient is the 1-N Portfolio Strategy?," The Review of Financial Studies, Society for Financial Studies, vol. 22(5), pages 1915-1953, May.
    9. repec:dau:papers:123456789/4688 is not listed on IDEAS
    10. Jammazi, Rania & Aloui, Chaker, 2012. "Crude oil price forecasting: Experimental evidence from wavelet decomposition and neural network modeling," Energy Economics, Elsevier, vol. 34(3), pages 828-841.
    11. repec:bla:jfinan:v:59:y:2004:i:6:p:2809-2834 is not listed on IDEAS
    12. Aloui, Riadh & Aïssa, Mohamed Safouane Ben & Nguyen, Duc Khuong, 2011. "Global financial crisis, extreme interdependences, and contagion effects: The role of economic structure?," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 130-141, January.
    13. Gallegati, Marco, 2012. "A wavelet-based approach to test for financial market contagion," Computational Statistics & Data Analysis, Elsevier, vol. 56(11), pages 3491-3497.
    14. Huang, Xuan & An, Haizhong & Gao, Xiangyun & Hao, Xiaoqing & Liu, Pengpeng, 2015. "Multiresolution transmission of the correlation modes between bivariate time series based on complex network theory," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 428(C), pages 493-506.
    15. Aloui, Chaker & Hkiri, Besma, 2014. "Co-movements of GCC emerging stock markets: New evidence from wavelet coherence analysis," Economic Modelling, Elsevier, vol. 36(C), pages 421-431.
    16. Ramsey, J.B., 2002. "Wavelets in Economics and Finance: Past and Future," Working Papers 02-02, C.V. Starr Center for Applied Economics, New York University.
    17. Dewandaru, Ginanjar & Masih, Rumi & Masih, A. Mansur M., 2015. "Why is no financial crisis a dress rehearsal for the next? Exploring contagious heterogeneities across major Asian stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 419(C), pages 241-259.
    18. repec:cii:cepiei:2013-q1-133-6 is not listed on IDEAS
    19. Boubaker, Heni & Sghaier, Nadia, 2013. "Portfolio optimization in the presence of dependent financial returns with long memory: A copula based approach," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 361-377.
    20. Mikko Ranta, 2013. "Contagion among major world markets: a wavelet approach," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 9(2), pages 133-149, March.
    21. Ramsey James B., 2002. "Wavelets in Economics and Finance: Past and Future," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 6(3), pages 1-29, November.
    22. Theo Berger, 2013. "Forecasting value-at-risk using time varying copulas and EVT return distributions," International Economics, CEPII research center, issue 133, pages 93-106.
    23. Reboredo, Juan C. & Rivera-Castro, Miguel A., 2014. "Wavelet-based evidence of the impact of oil prices on stock returns," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 145-176.
    24. Ozun, Alper & Cifter, Atilla, 2007. "Portfolio Value-at-Risk with Time-Varying Copula: Evidence from the Americas," MPRA Paper 2711, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Berger, Theo & Uddin, Gazi Salah, 2016. "On the dynamic dependence between equity markets, commodity futures and economic uncertainty indexes," Energy Economics, Elsevier, vol. 56(C), pages 374-383.
    2. Shahzad, Syed Jawad Hussain & Kumar, Ronald Ravinesh & Ali, Sajid & Ameer, Saba, 2016. "Interdependence between Greece and other European stock markets: A comparison of wavelet and VMD copula, and the portfolio implications," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 457(C), pages 8-33.
    3. Sevillano, María Caridad & Jareño, Francisco & López, Raquel & Esparcia, Carlos, 2024. "Connectedness between oil price shocks and US sector returns: Evidence from TVP-VAR and wavelet decomposition," Energy Economics, Elsevier, vol. 131(C).
    4. Bai, Xiwen, 2021. "Tanker freight rates and economic policy uncertainty: A wavelet-based copula approach," Energy, Elsevier, vol. 235(C).
    5. Yang, Lu & Yang, Lei & Hamori, Shigeyuki, 2018. "Determinants of dependence structures of sovereign credit default swap spreads between G7 and BRICS countries," International Review of Financial Analysis, Elsevier, vol. 59(C), pages 19-34.
    6. Wang, Xinya & Liu, Huifang & Huang, Shupei & Lucey, Brian, 2019. "Identifying the multiscale financial contagion in precious metal markets," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 209-219.
    7. Li, Xiafei & Wei, Yu, 2018. "The dependence and risk spillover between crude oil market and China stock market: New evidence from a variational mode decomposition-based copula method," Energy Economics, Elsevier, vol. 74(C), pages 565-581.
    8. Zeng, Sheng & Liu, Xinchun & Li, Xiafei & Wei, Qi & Shang, Yue, 2019. "Information dominance among hedging assets: Evidence from return and volatility directional spillovers in time and frequency domains," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 536(C).
    9. Sewraj, Deeya & Gebka, Bartosz & Anderson, Robert D.J., 2019. "Day-of-the-week effects in financial contagion," Finance Research Letters, Elsevier, vol. 28(C), pages 221-226.
    10. Jammazi, Rania & Reboredo, Juan C., 2016. "Dependence and risk management in oil and stock markets. A wavelet-copula analysis," Energy, Elsevier, vol. 107(C), pages 866-888.
    11. Su, Zhi & Liu, Peng & Fang, Tong, 2022. "Uncertainty matters in US financial information spillovers: Evidence from a directed acyclic graph approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 229-242.
    12. Yahya, Muhammad & Oglend, Atle & Dahl, Roy Endré, 2019. "Temporal and spectral dependence between crude oil and agricultural commodities: A wavelet-based copula approach," Energy Economics, Elsevier, vol. 80(C), pages 277-296.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shahzad, Syed Jawad Hussain & Kumar, Ronald Ravinesh & Ali, Sajid & Ameer, Saba, 2016. "Interdependence between Greece and other European stock markets: A comparison of wavelet and VMD copula, and the portfolio implications," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 457(C), pages 8-33.
    2. Das, Debojyoti & Bhowmik, Puja & Jana, R.K., 2018. "A multiscale analysis of stock return co-movements and spillovers: Evidence from Pacific developed markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 502(C), pages 379-393.
    3. Claudiu Tiberiu Albulescu & Daniel Goyeau & Aviral Kumar Tiwari, 2017. "Co-movements and contagion between international stock index futures markets," Empirical Economics, Springer, vol. 52(4), pages 1529-1568, June.
    4. Martín-Barragán, Belén & Ramos, Sofia B. & Veiga, Helena, 2015. "Correlations between oil and stock markets: A wavelet-based approach," Economic Modelling, Elsevier, vol. 50(C), pages 212-227.
    5. Berger, Theo, 2016. "On the isolated impact of copulas on risk measurement: Asimulation study," Economic Modelling, Elsevier, vol. 58(C), pages 475-481.
    6. Shahzad, Syed Jawad Hussain & Nor, Safwan Mohd & Kumar, Ronald Ravinesh & Mensi, Walid, 2017. "Interdependence and contagion among industry-level US credit markets: An application of wavelet and VMD based copula approaches," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 466(C), pages 310-324.
    7. Tiwari, Aviral Kumar & Mutascu, Mihai Ioan & Albulescu, Claudiu Tiberiu, 2016. "Continuous wavelet transform and rolling correlation of European stock markets," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 237-256.
    8. Jian Zhou, 2012. "Multiscale Analysis of International Linkages of REIT Returns and Volatilities," The Journal of Real Estate Finance and Economics, Springer, vol. 45(4), pages 1062-1087, November.
    9. Wahbeeah Mohti & Andreia Dionísio & Paulo Ferreira & Isabel Vieira, 2019. "Contagion of the Subprime Financial Crisis on Frontier Stock Markets: A Copula Analysis," Economies, MDPI, vol. 7(1), pages 1-14, February.
    10. Ahmed, Walid M.A., 2022. "On the higher-order moment interdependence of stock and commodity markets: A wavelet coherence analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 83(C), pages 135-151.
    11. Baruník, Jozef & Kočenda, Evžen & Vácha, Lukáš, 2016. "Gold, oil, and stocks: Dynamic correlations," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 186-201.
    12. Chakrabarty, Anindya & De, Anupam & Gunasekaran, Angappa & Dubey, Rameshwar, 2015. "Investment horizon heterogeneity and wavelet: Overview and further research directions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 429(C), pages 45-61.
    13. Chollete, Lorán & de la Peña, Victor & Lu, Ching-Chih, 2011. "International diversification: A copula approach," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 403-417, February.
    14. Chollete, Loran & Ning, Cathy, 2010. "Asymmetric Dependence in US Financial Risk Factors?," UiS Working Papers in Economics and Finance 2011/2, University of Stavanger.
    15. Boubaker, Heni & Sghaier, Nadia, 2013. "Portfolio optimization in the presence of dependent financial returns with long memory: A copula based approach," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 361-377.
    16. Bekiros, Stelios & Hernandez, Jose Arreola & Hammoudeh, Shawkat & Nguyen, Duc Khuong, 2015. "Multivariate dependence risk and portfolio optimization: An application to mining stock portfolios," Resources Policy, Elsevier, vol. 46(P2), pages 1-11.
    17. Huang, Shupei & An, Haizhong & Gao, Xiangyun & Sun, Xiaoqi, 2017. "Do oil price asymmetric effects on the stock market persist in multiple time horizons?," Applied Energy, Elsevier, vol. 185(P2), pages 1799-1808.
    18. Zied Ftiti & Aviral Tiwari & Amél Belanès & Khaled Guesmi, 2015. "Tests of Financial Market Contagion: Evolutionary Cospectral Analysis Versus Wavelet Analysis," Computational Economics, Springer;Society for Computational Economics, vol. 46(4), pages 575-611, December.
    19. Ying Fan & Abdullah Yavas, 2023. "Price Dynamics in Public and Private Commercial Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 67(1), pages 150-190, July.
    20. Reboredo, Juan C., 2012. "Do food and oil prices co-move?," Energy Policy, Elsevier, vol. 49(C), pages 456-467.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:436:y:2015:i:c:p:338-350. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.