We propose a novel regime-switching model to study correlation asymmetries in international equity markets. We decompose returns into frequent-but-small diffusion and infrequent-but-large jumps, and derive an estimation method for many countries. We find that correlations due to jumps, not diffusion, increase markedly in bad markets leading to correlation breaks during crises. Our model provides a better description of correlation asymmetries than GARCH, copula and stochastic volatilit ymodels. Good and bad regimes are persistent. Regime changes are detected rapidly and risk diversification allocations are improved. Asset allocation results in and out-of-sample are superior to other models including the 1/strategy.

中文翻译：

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国际关联不对称：股票收益频繁但规模很小而收益却不大

我们提出了一种新颖的制度转换模型来研究国际股票市场中的相关不对称性。我们将收益分解为频繁但很小的扩散和不频繁但较大的跳跃，并推导了许多国家的估计方法。我们发现，在不良市场中，由于跳跃而不是扩散引起的相关性显着增加，从而导致危机期间的相关性破裂。我们的模型比GARCH，copula和随机挥发模型更好地描述了相关不对称性。善政和恶政是持久的。迅速发现制度变化，改善了风险分散分配。样本中和样本外的资产分配结果均优于包括1 /策略在内的其他模型。