DEPENDENCE STRUCTURE BETWEEN STOCK RETURNS OF DEVELOPING AND DEVELOPED COUNTRIES

This study aims to examine the dependence pattern of stock returns prevailing in developing and developed countries. To check the dependence pattern, this study choose sample dataset of stock returns from time span of 2009 to 2019 from stock exchange institutes of Pakistan, Indonesia, Germany and United Kingdom. On the basis of gross domestic product, imports and exports, Pakistan and Indonesia are choosen as developing countries while United Kingdom and Germany as developed countries. In this study, descriptive statistics, copulas approach, spearman's correlation, kendall's tau and akaike information criterion (AIC) are the techniques used for testing the hypothesis. Findings show that tail dependence is identical between stock returns of developing and developed countries with the movement in same directions whether increasing or decreasing. Furthermore, results are showing that t-student copula is best-fitted for measuring the dependence pattern among stock institutions of developing and developed countries. This study proves helpful for investors, policy makers and financial representatives for risk management.