Research On Stock Index Returns Asymmetric Correlation

Since the end of the20th century, the linkage effects among international stock index are more close along with the further deepening of economic globalization. Stock market, as a barometer of economic development, whose yields correlation behaviors are more and more obvious, is thus given concerns of academics. However, the correlation coefficients of stock index yields are significantly different when the market is at its up or down stage. Academics defines the phenomenon as Asymmetric Correlation of stock index yields. This paper, majorly based on Shanghai Composite Index in China, Hang Seng Index in Hong Kong and the US Standard&Poor’s500Index as example, examines the asymmetric correlation of the above three stock indexes.Base on loads of reading and sorting on references, this paper selected Stock Index Volatility and Correlation Coefficient of Stock Index Yields two kinds of measurement methods and theoretically proved the existence of asymmetric correlation of stock index yields under the framework of Vector Auto-Regression model(VAR), then revealed the causes of asymmetric correlation. Otherwise, considering the investor utility maximization principle and the causes of asymmetric correlation, this paper deducted separately optimal invest portfolio of considering and non-considering the asymmetric correlation. Based on the weights of all indexes calculated out of the portfolio, the added value of investors considering the asymmetric correlation with different risk preferences was deducted and empirically tested. this paper made a summary accordance with the above conclusions and provided different investment suggestions for stock markets in different countries and investors with different risk preferences.