Corrected GARCH-DCC-MIDAS models in economics and finance

Abstract

The aim of this thesis is to investigate the dynamic correlation of cross-assets via multivariate GARCH frameworks, we further examine the recent crisis shock impact on these dynamic correlations. Moreover, our analysis discovers how macroeconomic factors in-

uence the cross-assets connectedness and also connect to the corresponding crisis. This thesis contributes to the time-varying correlation of cross-assets in the economy and - nance. Firstly, we study the macro drivers of the time-varying (dynamic) connectedness between eleven European tourism industries. We examine the dynamic co-movement of travel and leisure markets via GJR-MGARCH-DECO speci cation. Our empirical evidence provides new evidence of correlations' counter-cyclical behaviour such as the weak economy can cause higher cross-country interdependence; the main factors can be characterised by elevated uncertainty and geopolitical risk, tighter credit and liquidity conditions, and sluggish economic and real estate activity. Secondly, we investigate the cross-country interdependence among six countries' sustainability benchmarks via DCC-MIDAS; in this chapter, we identify the hedging properties and interdependence types in the short- and long-run dynamic correlation across the business cycle. Furthermore, we study how the corresponding crisis shock in uences the co-movements. In addition, our study suggests that the sustainability correlation pattern's signi cant macro- and crisis-sensitivity reveal strong countercyclical cross-country sustainability interlinkages for the majority of index pairs and crisis periods. In the last two chapters, we study the dynamic interdependence between nancial and ' nancialised' assets. We purpose the corrected DCC-GARCH-MIDAS setting to analyse the short- and long-run time-varying correlation dynamics among these assets. Both chapters' evidence provides that most cases are strong countercyclical cross-asset interlinkages which are highly dependent on the economic environment; some cross-assets are weak procyclical condition which is safe-haven properties. We also relate the dynamic correlation to the macro-determinants and the corresponding crisis shocks.