CORRELATION ANALYSIS OF THE BET-FI INDEX’S CONSTITUENTS

• Main Author: STANCIU CRISTIAN VALERIU
• Format: Article
• Language: English
• Published: Academica Brâncuşi 2017-12-01
• Series: Analele Universităţii Constantin Brâncuşi din Târgu Jiu : Seria Economie
• Subjects: dynamic conditional correlation (DCC) model; constituents of the BET-FI index; indices; stock exchange
• Online Access: http://www.utgjiu.ro/revista/ec/pdf/2016-Special%20ECOTREND%20Vol%202/18_STANCIU%20CRISTIAN%20VALERIU.pdf

Stocks, bonds, derivatives and structured products listed on the Bucharest Stock Exchange are, still, financial instruments often used by investors in the construction of investment portfolios. An important role in this process have indices, and this for several reasons: indices reflect the evolution of the stock exchange as a whole, but also of some companies in representative sectors; the composition of the indices includes important companies, attractive for the investors; by the way they are constructed, indices can be used as underlying for structured products or derivatives. The aim of this paper is to examine the correlations between the six companies which are the constituents of the BETFI index (Bucharest Exchange Trading Investment Funds), the first sectorial index launched by Bucharest Stock Exchange. To achieve this objective, we use a dynamic conditional correlation (DCC) model using daily data over the period February 2011- October 2016.We hope that this paper can be a useful tool for investors in formulating the right investment policies for asset allocation in order to obtain the best results in terms of risk and return.