The paper models the dynamic conditional correlations in emerging stock, bond and
foreign exchange markets using the DCC model of Engle (2002) and the GARCC
model of McAleer et al. (2008). The highly restrictive DCC model suggests that the
conditional correlations of the overall returns are constant. In contrast, the GARCC
model finds that the conditional correlations between bond-bond markets and between
stock-stock markets are relatively constant across developed-emerging markets, while
those between emerging-emerging markets are dynamic. The conditional correlations
between stock-bond markets across developed-emerging markets are also more
dynamic as compared with those between emerging-emerging markets. |