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Asymmetric dependence of intraday frequency components in the Brazilian stock market

Author

Listed:
  • Marcela de Marillac Carvalho

    (Federal University of Lavras)

  • Luiz Otávio de Oliveira Pala

    (Federal University of Lavras)

  • Gabriel Rodrigo Gomes Pessanha

    (Federal University of Alfenas)

  • Thelma Sáfadi

    (Federal University of Lavras)

Abstract

The multivariate dependence plays an important role in financial instrument management. Due to the inherent characteristics in the financial market, such as heavy tails in the returns unconditional distribution and asymmetry between gain and loss, we obtained the asymmetric dependence structure in different short-term variation scales based on the wavelet technique MODWT. The study sought to capture the relations between financial returns represented by its frequency components. Intraday returns series was used in the 15-min sampling interval from stocks and applied the D-Vine pair-copula to decompose in trade frequencies of 15 min, 1 h, 1 day, and 1 week with margin adjustments of ARIMA-APARCH class and BB7 copula function, responsible for measuring the dependence on tails. The results indicated the prevalence of a high dependence during market upturns, rising over the analyzed frequencies. Being an important tool in financial management and allowing short-term strategies of diversification.

Suggested Citation

  • Marcela de Marillac Carvalho & Luiz Otávio de Oliveira Pala & Gabriel Rodrigo Gomes Pessanha & Thelma Sáfadi, 2021. "Asymmetric dependence of intraday frequency components in the Brazilian stock market," SN Business & Economics, Springer, vol. 1(6), pages 1-18, June.
    • Handle: RePEc:spr:snbeco:v:1:y:2021:i:6:d:10.1007_s43546-021-00080-7
    DOI: 10.1007/s43546-021-00080-7
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    More about this item

    Keywords

    Multivariate dependence; Financial returns; Copulas; Wavelets; High frequency;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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