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Identification of Asset Price Misalignments on Financial Markets With Extreme Value Theory

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  • Narcisa Kadlcakova
  • Lubos Komarek
  • Zlatuse Komarkova
  • Michal Hlavacek

Abstract

This article examines the potential for concurrence of crises and asset price misalignments from equilibrium in the foreign exchange, stock, and government bond markets of three Central European countries and the euro area. Concurrence is understood as the joint occurrence of extreme asset changes and is assessed with a measure of asymptotic tail dependence in the distributions studied. The results reveal a significant potential for the co-alignment of crises in the examined markets. Evidence for co-movements in misalignments from equilibrium is found among all examined stock and exchange rate markets; although it is not apparent in some government bond markets.

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  • Narcisa Kadlcakova & Lubos Komarek & Zlatuse Komarkova & Michal Hlavacek, 2016. "Identification of Asset Price Misalignments on Financial Markets With Extreme Value Theory," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(11), pages 2595-2609, November.
    • Handle: RePEc:mes:emfitr:v:52:y:2016:i:11:p:2595-2609
    DOI: 10.1080/1540496X.2015.1087792
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    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis

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