Long Memory in Asymmetric Dependence Between LME and Chinese Aluminum Futures

摘要

The co-dependence of many asset returns has been shown to be asymmetric and to follow long memory dynamics in recent studies. To capture the two features simultaneously, based on Hafner and Manner (2012), we propose the new model of fractionally integrated stochastic copula allowing for long memory in the evolution of co-dependence. In the empirical analysis, the aluminum futures markets of London Metal Exchange and Shanghai Futures Exchange were shown to have stronger co-dependence in market downturns than in upturns, and long memory was present in the dynamics of both upper and lower-tail dependence. (c) 2015 Wiley Periodicals, Inc. Jrl Fut Mark 36:267-294, 2016