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Author: Mr.Ray Yeu-Tien Chou Publisher: International Monetary Fund ISBN: 1451950705 Category : Business & Economics Languages : en Pages : 16
Book Description
In this paper, we derive evidence on the integration of international stock markets from the cointegration properties of international stock market prices. Using the multivariate cointegration test of Johansen, we find that the set of six country stock price indices, including that of the United States, Canada, the United Kingdom, France, Germany, and Japan are cointegrated. The results suggest that there are long-run equilibrium relationships among the stock market prices. Subsample and subgroup analyses also indicate that the cointegration relationships have become stronger over time. This is consistent with greater stock market integration amid the increasing liberalization and globalization of capital markets.
Author: Mr.Ray Yeu-Tien Chou Publisher: International Monetary Fund ISBN: 1451950705 Category : Business & Economics Languages : en Pages : 16
Book Description
In this paper, we derive evidence on the integration of international stock markets from the cointegration properties of international stock market prices. Using the multivariate cointegration test of Johansen, we find that the set of six country stock price indices, including that of the United States, Canada, the United Kingdom, France, Germany, and Japan are cointegrated. The results suggest that there are long-run equilibrium relationships among the stock market prices. Subsample and subgroup analyses also indicate that the cointegration relationships have become stronger over time. This is consistent with greater stock market integration amid the increasing liberalization and globalization of capital markets.
Author: Anthony John Richards Publisher: International Monetary Fund ISBN: Category : Business & Economics Languages : en Pages : 36
Book Description
This paper is a response to the literature that tests for cointegration between national stock market indices. It argues that apparent findings of cointegration in other studies may often be due to the use of asymptotic, rather than small-sample, critical values. In fact, economic theory suggests that cointegration is unlikely to be observed in efficient markets. However, this paper finds some evidence for the long-horizon predictability of relative returns, and the existence of “winner-loser” reversals across 16 national equity markets. A conclusion is that national stock market indices include a common world component and two country-specific components, one permanent and one transitory.
Author: Thomas Dimpfl Publisher: ISBN: Category : Languages : en Pages : 26
Book Description
Cointegration has frequently been used in the financial econometrics literature to assess the degree of interdependence of financial markets. We show that if individual stock prices are generated by random walks with possibly contemporaneously correlated innovations, the resulting indices cannot be cointegrated as they are a combination of n random walks which itself is non-stationary by construction. This result holds if (as in factor models) an additional common global or local random walk is allowed for. There will, however, never be less than n random walk components, as otherwise company specific characteristics would be ruled out to affect the stock price permanently. To substantiate the theoretical propositions we simulate stock prices (allowing for heteroscedasticity, correlated innovations and common factors), construct indices and test whether these indices are cointegrated. We show that while heteroscedasticity alone is able to mislead cointegration tests, it is not sufficient to explain at the same time the empirically found high correlation between stock market indices. A common stochastic factor as well as correlated price innovations are necessary to reproduce the empirical characteristic features. We conclude that cointegration is not a suitable method to analyze stock market interdependence.
Author: Mr.Paul Cashin Publisher: International Monetary Fund ISBN: 1451853289 Category : Business & Economics Languages : en Pages : 58
Book Description
This paper investigates empirically the degree of international integration of industrial and emerging country equity markets. It analyzes two issues: first, the extent to which equity prices have tended to move similarly across countries and regions in the long run; and second, the strength of cross-country “contagion” effects. The paper’s findings suggest that both intra-regional and inter-regional linkages across national equity markets have strengthened in recent years. In addition, using impulse response functions, the paper shows that cross-country contagion effects of country-specific shocks dissipate in a matter of weeks while contagion effects of global shocks take several months to unwind themselves.
Author: Victor K. Ng Publisher: ISBN: Category : Languages : en Pages : 16
Book Description
In this paper, we derive evidence on the integration of international stock markets from the cointegration properties of international stock market prices. Using the multivariate cointegration test of Johansen, we find that the set of six country stock price indices, including that of the United States, Canada, the United Kingdom, France, Germany, and Japan are cointegrated. The results suggest that there are long-run equilibrium relationships among the stock market prices. Subsample and subgroup analyses also indicate that the cointegration relationships have become stronger over time. This is consistent with greater stock market integration amid the increasing liberalization and globalization of capital markets.
Author: Anthony J. Richards Publisher: ISBN: Category : Languages : en Pages : 30
Book Description
This paper is a response to the literature that tests for cointegration between national stock market indices. It argues that apparent findings of cointegration in other studies may often be due to the use of asymptotic, rather than small-sample, critical values. In fact, economic theory suggests that cointegration is unlikely to be observed in efficient markets. However, this paper finds some evidence for the long-horizon predictability of relative returns, and the existence of quot;winner-loserquot; reversals across 16 national equity markets. A conclusion is that national stock market indices include a common world component and two country-specific components, one permanent and one transitory.
Author: Dr. Isha Rawal Publisher: ISBN: Category : Languages : en Pages :
Book Description
This study identifies the impact of three natural disasters on cointegrating relationship among selected world stock market indices. The study further suggests the best international diversification strategy in case of the occurrence of an extreme event from the perspective of an Indian investor. A vast amount of research suggests that international portfolio diversification helps to spread the risk of any adversity occurring in a particular country as the correlations among stocks in various countries are lower as compared to local securities. But the disagreement nevertheless is that in a number of instances, diversifying internationally might not be effective. To fill this research gap, the study employs Johansen multivariate cointegration test to evaluate change in the financial linkages between selected stock market indices during the pre- and post-one year event period for three events to include China Earthquake of 2008, Japan earthquake and tsunami of 2011 and the US Hurricane Sandy of 2012. The study further compares performance of different portfolio diversification strategies, viz., Naive 1/N portfolio construction technique, Markowitz modern portfolio theory and cointegration-based portfolio construction method with the aid of Sharpe's ratio. The study finds that with the help of cointegration analysis, effective portfolio selection can be done to seek maximum diversification benefit.
Author: Mr.Ray Yeu-Tien Chou
Author: Mr.Ray Yeu-Tien Chou
Author: Anthony John Richards
Author: Fondo Monetario Internacional
Author: Thomas Dimpfl
Author: Mr.Paul Cashin
Author: Victor K. Ng
Author: Anthony J. Richards
Author: Brian J. Geiger
Author: Dr. Isha Rawal
Author: Markku Malkamäki