S-WoPEc
 
Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Centre for Labour Market Policy Research (CAFO), School of Business and Economics, Linnaeus University CAFO Working Papers, Centre for Labour Market Policy Research (CAFO), School of Business and Economics, Linnaeus University

No 2009:9:
Test of the Gaussian Copula on the Swedish Stock Market

Jonas Söderberg ()

Abstract: This paper examines whether the pairwise comovement between stocks quoted on the Stockholm stock exchange can be correctly quantified by the Gaussian copula, i.e., by linear correlation. Two different methods are used to test whether the dependence on the Swedish stock market can be modeled by the Gaussian copula. From these tests, we come to the conclusion that the Gaussian copula is not an appropriate choice of copula for the Swedish stock market. We also come to the same conclusion when observing sector and industry indices on the Swedish stock market. However, if performing a GARCH filtering of the return series, there is a substantial decrease in the number of pairs of either stocks or indices for which the Gaussian copula can be rejected. For the two test methods, a notable difference in the rejection rate of the Gaussian copula can also be observed.

Keywords: Risk management; Gaussian copula; Swedish stock markets; GARCH filtering; (follow links to similar papers)

JEL-Codes: C52; G11; G32; (follow links to similar papers)

24 pages, December 1, 2008

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

Nek_wp9_09.pdf    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Andreas Mångs ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:vxcafo:2009_009 This page was generated on 2014-12-14 19:28:30