Correlation and Volatility Asymmetries in International Equity Markets

Download or read book Correlation and Volatility Asymmetries in International Equity Markets written by CFA O'Toole (Randy) and published by . This book was released on 2013 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: The co-movement of international equity markets in different return environments is examined using estimates of realized correlation and volatility. Using a simple ordinary least squares (OLS) regression framework, correlations are shown to be similarly elevated in periods characterized by extreme returns in both up and down markets, which contradicts a body of extant research that finds correlations increase in down markets but not in up markets. In contrast, volatility is much greater in down markets than in up markets. This suggests that it is not a lack of diversification that matters for comparative performance in bear markets, but rather the relative magnitude of negative returns typically experienced during such periods.