Dependence and Value at Risk in the Stock Markets from the Americas: A Copula Approach

Christian Bucio; Alejandra Cabello; Edgar Ortiz

Christian Bucio Universidad Nacional Autonoma de Mexico, Apartado 21-244. Col/Del Coyoacan. 04320 Mexico, D.F.
Alejandra Cabello Universidad Nacional Autónoma de Mexico, Apartado 21-244. Col/Del Coyoacán. 04320 Mexico, D.F.
Edgar Ortiz Universidad Autonoma del Estado de Mexico Unidad Profesional de Huehuetoca, Apartado 21-244 Col/Del Coyoacan 04320 Mexico, D.F.

Keywords: Copula, Value at Risk, Stock Markets North America, Stock Markets Latin America.

Abstract

This work applies copula modeling to estimate the degree of dependence among the nine major equity markets from the Western Hemisphere, seven emerging markets from Latin America (Argentina, Brazil, Chile, Colombia, Peru, Venezuela, Mexico) and the two mature markets from North America (Canada, United States). The relevance of copula-measured dependence is assessed estimating Value at Risk for bilateral portfolio investments, comparing it with conventional VaR methodologies. The data encompass daily time series for the 1992-2009 period.

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