Determinants of Time Varying Co-Movements Among International Stock Markets During Crisis and Non-Crisis Periods PDF Download
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Author: Mobarek Asma
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
In this paper, we use the DCC MIDAS approach to assess the validity of the wake-up call hypothesis for developed and emerging markets during the global financial crisis (GFC). We use this approach to decompose the total correlations into short- (daily) and long-run (quarterly) correlations for the period from 1999 to 2011. We then examine the transmission mechanisms by regressing the quarterly economic, financial, and behavioral variables on the quarterly DCC-MIDAS correlations. We find that country specific factors are crisis contingent transmission mechanisms for the co-movements of emerging country pairs and mixed pairs of advanced and emerging countries during the global financial crisis. However, we do not observe wake-up calls in the transmission of the crisis among advanced country pairs. The classification of the transmission mechanisms for crisis and non-crisis periods with the different country pairs has important implications for crisis management as well as for portfolio investment strategies. Thus, our findings contribute to the discussion on the role and effectiveness of the international financial architecture.
Author: Mobarek Asma
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
In this paper, we use the DCC MIDAS approach to assess the validity of the wake-up call hypothesis for developed and emerging markets during the global financial crisis (GFC). We use this approach to decompose the total correlations into short- (daily) and long-run (quarterly) correlations for the period from 1999 to 2011. We then examine the transmission mechanisms by regressing the quarterly economic, financial, and behavioral variables on the quarterly DCC-MIDAS correlations. We find that country specific factors are crisis contingent transmission mechanisms for the co-movements of emerging country pairs and mixed pairs of advanced and emerging countries during the global financial crisis. However, we do not observe wake-up calls in the transmission of the crisis among advanced country pairs. The classification of the transmission mechanisms for crisis and non-crisis periods with the different country pairs has important implications for crisis management as well as for portfolio investment strategies. Thus, our findings contribute to the discussion on the role and effectiveness of the international financial architecture.
Author: Kristin Forbes
Publisher:
ISBN:
Category : Contagion (Social psychology)
Languages : en
Pages : 54
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Book Description
This paper examines stock market co-movements. It begins with a discussion of several conceptual issues involved in measuring these movements and how to test for contagion. Standard tests examine if cross-market correlation in stock market returns increase during a period of crisis. The measure of cross-market correlations central to this standard analysis, however, is biased. The unadjusted correlation coefficient is conditional on market movements over the time period under consideration, so that during a period of turmoil when stock market volatility increases, standard estimates of cross-market correlations will be biased upward. It is straightforward to adjust the correlation coefficient to correct for this bias. The remainder of the paper applies these concepts to test for stock market contagion during the 1997 East Asian crises, the 1994 Mexican peso collapse, and the 1987 U.S. stock market crash. In each of these cases, tests based on the unadjusted correlation coefficients find evidence of contagion in several countries, while tests based on the adjusted coefficients find virtually no contagion. This suggests that high market co-movements during these periods were a continuation of strong cross-market linkages. In other words, during these three crises there was no contagion, only interdependence.
Author: Suk-Joong Kim
Publisher: Elsevier
ISBN: 0762314710
Category : Business & Economics
Languages : en
Pages : 537
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Book Description
This volume of "International Finance Review" focuses on the Asia-Pacific financial markets. A total of 22 original papers, not published elsewhere, have been selected from a competitive field. These papers utilize a variety of methods, including theoretical, empirical and qualitative to highlight a range of issues across the region. Several papers offer combinations of these different categories and among the empirical papers, there are a wide variety of datasets analyzed. While China does play a significant part in the analysis of five of the papers in this volume (this is to be expected given its importance in the region), a host of other countries are also considered. This ensures the volume is truly international in its scope. These papers each serve to contribute to the knowledge on a particular issue related to the financial markets within this region and for this volume, three main issues have been identified: integration, innovation and challenges. Articles are contributed by experts in their fields. It is truly international in scope.
Author: Gazi Salah Uddin
Publisher:
ISBN:
Category :
Languages : en
Pages : 23
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Book Description
The analysis of co-movements of stock market returns is a fundamental issue in finance. The aim of this paper is to examine the co-movement between Germany and major International Stock Markets in the time-frequency space. Our sample period goes from 01 June 1992 to 26 March 2013 and includes the financial crisis that erupted in US financial institutions in the summer of 2007 and spread beyond the US to other developed economies in the first half of 2008. We use DCC-GARCH and wavelet-based measures of co-movements which make it possible to find a balance between the time and frequency domain features of the data. The results suggest that the difference in the co-movement dynamics could be the result of the different natures of the financial crises or a change in regime. The finding of this paper has relevant policy implications in asset allocation and risk management in designing international portfolios for investment decisions.
Author: Seungho Jung
Publisher: International Monetary Fund
ISBN: 1557759677
Category : Business & Economics
Languages : en
Pages : 36
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Book Description
We investigate how corporate stock returns respond to geopolitical risk in the case of South Korea, which has experienced large and unpredictable geopolitical swings that originate from North Korea. To do so, a monthly index of geopolitical risk from North Korea (the GPRNK index) is constructed using automated keyword searches in South Korean media. The GPRNK index, designed to capture both upside and downside risk, corroborates that geopolitical risk sharply increases with the occurrence of nuclear tests, missile launches, or military confrontations, and decreases significantly around the times of summit meetings or multilateral talks. Using firm-level data, we find that heightened geopolitical risk reduces stock returns, and that the reductions in stock returns are greater especially for large firms, firms with a higher share of domestic investors, and for firms with a higher ratio of fixed assets to total assets. These results suggest that international portfolio diversification and investment irreversibility are important channels through which geopolitical risk affects stock returns.
Author: Nguyen, Duc K.
Publisher: Edward Elgar Publishing
ISBN: 1800880901
Category : Business & Economics
Languages : en
Pages : 867
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Book Description
Emerging markets are increasingly facing significant challenges, from a slowdown in productivity, rising debt, and trade tensions to the adverse effects of proliferating global uncertainty on domestic financial systems. This incisive Handbook examines the ongoing dynamics of global financial markets and institutions within the context of such rising uncertainty and provides a comprehensive overview of innovative models in banking and finance.
Author: Giovanni Pagliardi
Publisher:
ISBN:
Category :
Languages : en
Pages : 72
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Book Description
We investigate the determinants of international stock market co-movements, shedding light on the relevance of politics-related factors. We propose a new characterization for the link connecting politics and financial markets, disentangling two different components: political risk and economic policy risk. We uncover the surprisingly low correlation between the two variables, and show they are priced differently by the market. We implement a pairs trading strategy, in the spirit of Gatev et al. (2006), which loads on international stock market co-movements. Exclusively relying on hard macro-data proves not to be sufficient to explain the statistically significant and economically large returns generated by the strategy. We show how to increase the abnormal returns (alphas) generated by the strategy by exploiting shorter-time co-movements. We document the utmost relevance of political risk, which explains and predicts returns driven by both short-term and long-run correlations. Our analysis also unveils the relevance of confidence factors, especially foreign investors' confidence, which should therefore be accounted for when assessing the co-variation of international stock market prices.
Author: Balázs Égert
Publisher:
ISBN:
Category :
Languages : en
Pages : 16
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Book Description
We study comovements between three developed (France, Germany, the United Kingdom) and three emerging (the Czech Republic, Hungary and Poland) European stock markets. The novelty of our paper is that we apply the Dynamic Conditional Correlation GARCH models proposed by Engle (2002) to five-minute tick intraday stock price data for the period from June 2003 to January 2006. We find a strong correlation between the German and French markets and also between these two markets and the UK stock market. By contrast, very little systematic positive correlation can be detected between the Western European stock markets and the three stock markets of Central and Eastern Europe, as well as within the latter group.
Author: Laurent Ferrara
Publisher: Springer
ISBN: 3319790757
Category : Business & Economics
Languages : en
Pages : 300
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Book Description
This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.
Author: Bilel Kaffel
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
In the context of globalization, through a growing process of market liberalization, advanced technology and economic trading bloc, national stock markets have become more interdependent, which limits the international portfolio diversification opportunities. This paper investigates the degree of stock market co-movement between and within thirteen developed European Union markets, six developing Latin American markets, two developed North American markets, ten developing Asian markets, Norway, Switzerland, Australia and Japan markets. The research methodology employed includes wavelet coherence, wavelet correlation and cross-correlation and wavelet multiple cross-correlation. Results show a positive correlation across intra and inter trading blocs in all investment horizons and over time, and they show that the linkage between stock returns increases with the time scale, implying that the international diversification benefits have largely disappeared in globalized world markets. Moreover, we found a high degree of co-movement at low frequencies in crisis and no crisis periods, which indicates a fundamental theoretical relationship between stock market returns. Finally, multiple cross-correlation analysis reveals a lead/lag relationship which provides information to international investors to manage their investment portfolios facing sudden changes, and it reveals that Frances' stock market is able to pull the other major world stock markets at lower and high frequencies.
