Dynamic volatility of bank stock returns in Mexico: DCC-GARCH vs Copula-GARCH approaches
DOI:
https://doi.org/10.18381/eq.v20i2.7289Abstract
Objective: To analyze the dynamics of volatility among the main banks in Mexico.Methodology: Two complementary methodologies are used: i) DCC-GARCH and ii) Rolling window Copula-GARCH.Weekly closing prices of stocks among four of the main banks are used: BBVA, Citi-Banamex, Banorte and Inbursa, from January 27, 2009 to October 29, 2021.Results: The results confirm a time-varying correlation.Limitations: The main limitation is that we have not been able to include more banks due to the evolution of their prices.Originality: The originality lies in the contrast of the results.Both methodologies report similar results, but these are more restrictive as the distribution optimally captures the behavior of the data.Conclusions: We conclude that different volatility patterns encourage investment decisions that consider potential losses and promote portfolio diversification.Downloads
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