Multiresolution analysis of stock market correlation based on copula-SV model
Wang Xiangnin · 2013
The daily returns of Shanghai composite index and Shenzhen composite index were decomposed into four trading periods by means of maximum overlap discrete wavelet transform(MODWT),and then SV-t model was used to fit the margins distributions of these series.Based on this,copula function was established to fit the returns of two stock markets at different scales and the correlation of their respective tails was analyzed.The results show that,the correlation between Shanghai composite index and Shenzhen composite index at the same scale is much larger than at different scales.Furthermore,at the same confidence level and different scales,the correlation between the lower tails is larger than that between the upper tails.With the transaction cycle increasing,the correlation between lower tails and that between upper tails increase greatly.