Abstract
Significant second-moment transmission effects and obvious time-varying patterns of correlation coefficients among major equity and currency markets in the US, Japan and the UK are found to exist. Such observations inspire the time-varying setting of dynamic conditional correlation coefficients in MGARCH models. On the other hand, the multivariate Student-t distribution is suitable for analysing the visible leptokurtosis that is common in financial markets. Both are important for international portfolio risk management. Thus, a comparison on the hedging efficiency of hypothetical portfolios consisting of stock and currency future positions is conducted in order to justify the multivariate Student-t distribution based on the DCC-MGARCH model.
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