Conditional dependence un NAFTA Block: GARCH model and Copula approach

Abstract

This article aims to analyze conditional dependence between the Mexican, American and Canadian stock markets during the period 2003-2018. Archimedean and elliptical Copulas and GARCH and TARCH models are employed to estimate conditional dependence in three subperiods: pre-crisis, crisis and pos- global financial crisis. Results reveal a 38% rise in conditional dependence during the crisis period, in relation to the previous period. On the other hand, the conditional dependence parameter diminishes when asymmetry is included.

Keywords

• Conditional Dependence
• NAFTA
• GARCH
• Copula
• Contagion Effect