The impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations of South African financial markets
This paper considers the impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations between the South African stock, bond, and foreign exchange markets. Our first stage findings using the DCC-GARCH model show that correlations between the selected marke...
Saved in:
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Taylor & Francis Group
2024-12-01
|
| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2024.2431543 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1850158658186379264 |
|---|---|
| author | Kelleb Mloyi Edson Vengesai |
| author_facet | Kelleb Mloyi Edson Vengesai |
| author_sort | Kelleb Mloyi |
| collection | DOAJ |
| description | This paper considers the impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations between the South African stock, bond, and foreign exchange markets. Our first stage findings using the DCC-GARCH model show that correlations between the selected markets are significantly dynamic over time. We further show that the correlations of asset pairs do not fall for extended periods during crisis periods, implying only short-lived increase in diversification benefits. Further analysis using the OLS regression model shows that global risk aversion and domestic macroeconomic factors have a heterogenous impact on the dynamic correlations of asset pairs. Consequent to these findings, this study advocates for the adoption of dynamic asset allocation and diversification strategies necessitating the periodic optimisation of portfolios as asset correlations, global risk aversion and domestic macroeconomics evolve. The study offers valuable insights and policy recommendations for investment practitioners, policymakers, and academics. |
| format | Article |
| id | doaj-art-e44d6e534fe34d01abb533fcfb1ac191 |
| institution | OA Journals |
| issn | 2332-2039 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj-art-e44d6e534fe34d01abb533fcfb1ac1912025-08-20T02:23:48ZengTaylor & Francis GroupCogent Economics & Finance2332-20392024-12-0112110.1080/23322039.2024.2431543The impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations of South African financial marketsKelleb Mloyi0Edson Vengesai1Faculty of Economic and Management Studies, Department of Economics and Finance, The University of the Free State, Bloemfontein, Republic of South AfricaFaculty of Economic and Management Studies, Department of Economics and Finance, The University of the Free State, Bloemfontein, Republic of South AfricaThis paper considers the impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations between the South African stock, bond, and foreign exchange markets. Our first stage findings using the DCC-GARCH model show that correlations between the selected markets are significantly dynamic over time. We further show that the correlations of asset pairs do not fall for extended periods during crisis periods, implying only short-lived increase in diversification benefits. Further analysis using the OLS regression model shows that global risk aversion and domestic macroeconomic factors have a heterogenous impact on the dynamic correlations of asset pairs. Consequent to these findings, this study advocates for the adoption of dynamic asset allocation and diversification strategies necessitating the periodic optimisation of portfolios as asset correlations, global risk aversion and domestic macroeconomics evolve. The study offers valuable insights and policy recommendations for investment practitioners, policymakers, and academics.https://www.tandfonline.com/doi/10.1080/23322039.2024.2431543Global risk aversiondynamic conditional correlationDCC GARCHdiversificationmacro-economic factors Finance |
| spellingShingle | Kelleb Mloyi Edson Vengesai The impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations of South African financial markets Cogent Economics & Finance Global risk aversion dynamic conditional correlation DCC GARCH diversification macro-economic factors Finance |
| title | The impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations of South African financial markets |
| title_full | The impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations of South African financial markets |
| title_fullStr | The impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations of South African financial markets |
| title_full_unstemmed | The impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations of South African financial markets |
| title_short | The impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations of South African financial markets |
| title_sort | impact of global risk aversion and domestic macroeconomic factors on the dynamic conditional correlations of south african financial markets |
| topic | Global risk aversion dynamic conditional correlation DCC GARCH diversification macro-economic factors Finance |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2024.2431543 |
| work_keys_str_mv | AT kellebmloyi theimpactofglobalriskaversionanddomesticmacroeconomicfactorsonthedynamicconditionalcorrelationsofsouthafricanfinancialmarkets AT edsonvengesai theimpactofglobalriskaversionanddomesticmacroeconomicfactorsonthedynamicconditionalcorrelationsofsouthafricanfinancialmarkets AT kellebmloyi impactofglobalriskaversionanddomesticmacroeconomicfactorsonthedynamicconditionalcorrelationsofsouthafricanfinancialmarkets AT edsonvengesai impactofglobalriskaversionanddomesticmacroeconomicfactorsonthedynamicconditionalcorrelationsofsouthafricanfinancialmarkets |