J. of Multi. Fin. Manag. 37–38 (2016) 168–189 Contents lists available at ScienceDirect Journal of Multinational Financial Management journal homepage: www.elsevier.com/locate/econbase A time-varying copula approach for modelling dependency: New evidence from commodity and stock markets Lanouar Charfeddine ∗ , Noureddine Benlagha Department of Finance and Economics, College of Business and Economics, Qatar University, P.O. Box 2713, Doha, Qatar a r t i c l e i n f o Article history: Received 30 December 2015 Received in revised form 19 October 2016 Accepted 29 October 2016 Available online 4 November 2016 JEL classification: C58 G01 G15 Q02 Keywords: Time varying dependence Copula Breaks Commodity Stock market a b s t r a c t This paper examines the time-varying conditional dependency between commodity mar- kets and stock markets by applying the rolling-sample technique on the dependence parameter of copula. The dataset consists of the closing prices of twelve commodities and the SP500, CAC40, DAX30 and FTSE100 indices during the period from July 7, 1992 to February 17, 2015. To date precisely the breakpoints in the dynamics of the copula param- eter of dependence, we employ Bai and Perron’s (BP, 1998, 2003) structural break-testing procedure. Our empirical findings show that among the seven copulas investigated, the Student’s t- copula is more appropriate for modelling dependency. Moreover, the BP procedure shows strong evidence of time-varying behaviour in the parameter of dependence. The results show that the dates of breaks correspond to economic and financial events, such as the global financial crisis and crude oilprice fluctuations. © 2016 Elsevier B.V. All rights reserved. 1. Introduction It is commonly recognized that determining the true structure of dependence between international markets remains a challenging and interesting task for both academic researchers and market participants. For instance, by examining the structure of dependence between international markets, policymakers and investors can improve their forecasts, their portfolio hedging and the asset pricing of derivatives. In the recent literature, modelling dependence between equity, energy, metal, food and agriculture markets has widely increased. However, most of these studies have focused on modelling the market dependence of stock markets (Liu et al., 2013; Righi and Ceretta, 2015), between stock markets and energy markets (Apergis and Miller, 2009; Kilian and Park, 2009; Arouri and Nguyen, 2010; Aloui et al., 2013), or between different types of energy series (Gregoire et al., 2008). Overall, the literature shows that no consensus has be reached regarding this relationship. The results depend on many factors, such as the empirical methodology employed, the type of assets investigated (stocks, energy, metals, and agriculture), and the markets examined (developed, emerging and/or developing markets). Despite the large number of works investigating the dependence between international markets, little attention has been paid to the dependence structure between commodity and stock markets (see Cheung and Miu, 2010; Vivian and Wohar, 2012; Ckili et al., 2014). ∗ Corresponding author. E-mail addresses: lcharfeddine@qu.edu.qa, lanouar charf@yahoo.fr (L. Charfeddine), nbenlagha@qu.edu.qa (N. Benlagha). http://dx.doi.org/10.1016/j.mulfin.2016.10.003 1042-444X/© 2016 Elsevier B.V. All rights reserved.