Asymmetric dependence in finance : diversification, correlation and portfolio management in market downturns

"Asymmetric Dependence (hereafter, AD) is usually thought of as a cross-sectional phenomenon. Andrew Patton describes AD as "stock returns appear to be more highly correlated during market downturns than during market upturns." (Patton, 2004) Thus at a point in time when the market return is increasing we might expect to find the correlation between any two stocks to be, on average, lower than the correlation between those same two stocks when the market return is negative. However the term can also have a time series interpretation. Thus it may be that the impact of the current US market on the future UK market may be quantitatively different from the impact of the current UK market on the future US market. This is also a notion of AD that occurs through time. Whilst most of this book addresses the former notion of AD, time-series AD is explored in Chapters Four and Seven"--