FINANCIAL CRISIS AND STOCK MARKET LINKAGES

Article Sidebar

PDF
Published: 23-09-2015

Main Article Content

VICTOR MANUEL DE SOUSA GABRIEL
Polytechnic Institute of Guarda
Portugal
Biography
JOSE RAMOS PIRES MANSO
Portuguese Foundation for Science and Technology, Ministry of Education and Science
Portugal
Biography
Vol 23 No 4 (2014), Articles
DOI: https://doi.org/10.15304/rge.23.4.2793
Submitted: 23-09-2015 Accepted: 23-09-2015 Published: 23-09-2015
Copyright How to Cite

Abstract

This paper investigates interdependencies and linkages between international stock markets in the short-run. Thus, twelve European and non-European markets were selected, and the period from 4. October 1999 to 30 June 2011 was chosen, which includes the Dot-Com crisis and the recent Global Financial Crisis. To investigate interdependence and dynamic linkages between stock markets, a vector autoregressive model, the concept of Granger causality and impulse-response functions were considered. We concluded that the global financial crisis contributes to the intensification of the interdependence between stock markets.

 

Keywords:

Global Financial Crisis, Stock Markets, Co-Movements, Vector Autoregressive
Cited by

Article Details

References

AGMON, T. (1972): “The relations among equity markets: A study of share price comovements in the United States, United Kingdom, Germany and Japan,” Journal of Finance, vol. 27, pp. 839-855.

ALEXANDER, C. (2008): Market Risk Analysis Volume II: Practical Financial Econometrics, John Wiley & Sons Inc.

ARSHANAPALLI, B; DOUKAS, J; LANG, L. (1995): “Pre and post-October 1987 stock market linkages between U.S. and Asian markets”, Pacific-basin Finance Journal, vol. 3, pp. 57-73.

AZIAKPONO, M. (2006): “Financial Integration amongst the SACU Countries: Evidence from Interest Rate Pass-Through Analysis”, Studies in Economics and Econometrics, Vol. 30, No.2. South Africa.

BEKAERT, G.; HARVEY, C; LUNDBLAD, C.; SIEGEL, S. (2007): “Global Growth Opportunities and Market Integration”, Journal of Finance, 62(3), pp. 1081–1137.

BERTONECHE, M. (1979): “An empirical analysis of the interrelationships among equity markets under changing exchange rate systems”. Journal of Banking and Finance, Volume 3, Issue 4, pp. 397-405.

BRANCH, B. (1974): “Common stock performance and inflation: an international comparison”, Journal of Business, vol. 47, pp. 48-52.

BROOKS, C. (2002): Introductory Econometrics for Finance. Cambridge, United Kingdom. Cambridge University Press.

DICKEY, D.; FULLER, W. (1979): “Distribution of the Estimators for Time Series Regressions with a Unit Root”, Journal of the American Statistical Association, 74, pp. 427-31.

DIMARTINO, D.; DUCA, J. (2007): “The rise and fall of subprime mortgages”, Federal Reserve Bank of Dallas, Economic Letter, vol. 2 nº. 11.

EUN, C.; SHIM, S. (1989): “International Transmission of Stock Market Movements”, Journal of Financial and Quantitative Analysis, Vol. 24, pp. 241-256.

FAMA, E. (1970): “Efficient capital markets: A review of empirical work”, Journal of Finance, 25, pp. 383-417.

FORBES, K.; RIGOBON, R. (2002): “No contagion, only interdependence: measuring stock market co-movements”, Journal of Finance, 57, pp. 2223-62.

GOETZMANN, W.; LI, L.; ROUWENHORST, K. (2005): “Long-Term Global Market Correlations”, Journal of Business, 78(1), pp. 1-38.

GRANGER, C. (1969): “Investigating causal relationships by econometric models and crossspectral methods”, Econometrica, 37(3), pp. 424-438.

GRANGER, C.; MORGENSTERN, O. (1970): Predictability of stock market prices, Lexington, MA, Heath-Lexington Books.

GRUBEL, H. (1968): “Internationally diversified portfolios: welfare gains and capital flows”, American Economic Review, Vol. 58, pp. 1299-1314.

HASSAN, M.; ATSUYUKI, N. (1996): “Short-run and long-run dynamic linkages among international stock markets”. International Review of Economics and Finance, Volume 5, Issue 4, pp. 387-405.

HORTA, P.; MENDES, C.; VIEIRA, I. (2008): “Contagion Effects of the U.S. Subprime Crisis on Developed Countries”. University of Évora. Disponível em: http://www.cefage.uevora.pt/pt/producao_cientifica/working_papers_serie_cefage_ue/contagion_effects_of_the_us_subprime_crisis_on_developed_countries.

KOCH, P.; TIMOTHY, W. (1991): “Evolution in dynamic linkages across daily national stock indices”. Journal of International Money and Finance, Volume 10, Issue 2, pp. 231-251.

LAU, S.; MCINISH, T. (1993): “Co-movements of international equity returns: A comparison of pre- and post-October 19, 1987, periods”, Global Finance Journal, vol. 4, pp. 1-19.

LONGIN, F.; BRUNO, S. (1995): “Is the correlation in international equity returns constant: 1960-1990?”, Journal of International Money and Finance, Volume 14, Issue 1, pp. 3-26.

LUTKEPOHL, H. (1999): “Vetor Autoregressions,” unpublished manuscript, Institut für Statistik und Ökonometrie, Humboldt-Universitat zu Berlin.

LUTKEPOHL, H.; SAIKKONEN, P. (1997): “Impulse Response Analysis in In.nite Order Cointegrated Vetor Autoregressive Processes”, Journal of Econometrics, 81, pp. 127-157.

KAISER, H. (1970): “A Second Generation Little Jiffy,” Psychometrika, 35, pp. 401-415.

KAISER, H.; RICE, J. (1974): “Little Jiffy, Mark IV,” Educational and Psychological Measurement, 34, pp. 111–117.

KOOP, G.; PESARAN, M.; POTTER, S. (1996): “Impulse response analysis in non-linear multivariate models”, Journal of Econometrics, 74, pp. 119-147.

MANDIGMA, M. (2014): “Stock Market Linkages among the ASEAN 5+3 Countries and US: Further Evidence”, Management and Administrative Sciences Review, Volume: 3, Issue: 1, pp. 53-68.

NAOUI, K.; LIOUANE, N; BRAHIM, S. (2010): “A dynamic correlation analysis of financial contagion: the case of the subprime crisis”, International Journal of Economics and Finance, v. 2, n. 3, pp. 85-96.

OZDEMIR, Z.; CAKAN, E. (2007): “Non-linear Dynamic Linkages in the International Stock Markets”, Physica A: Statistical Mechanics and its Applications, 377, pp. 173–180.

PEIRO, A.; QUESADA, J.; EZEQUIEL, U. (1998): “Transmission of movements in stock markets”, The European Journal of Finance, Vol 4, pp. 331- 343.

PESARAN, H.; SHIN, Y. (1998): “Generalized impulse response analysis in linear multivariate models”, Economics Letter, Elsevier. 58(1), pp. 17-29.

PESTANA, M.; GAGEIRO, J. (2000): “Análise de Dados para Ciências Sociais: A complementaridade do SPSS”, 2ª edição, Edições Sílabo, Lisboa.

PINDYCK, R.; ROTEMBERG, J. (1990): “The excess co-movement of commodity prices”, The Economic Journal, 100, pp. 1173-89.

ROLL, R. (1988): “The international crash of October 1987”, Financial Analysts Journal, September/October, pp. 19-35.

SHARMA, S. (1996): Applied Multivariate Tecnhiques, John Wiley & Sons, New York.

SIMS, C. (1972): “Money, Income and Causality”, American Economic Review, 62, pp. 540-552.

SIMS, C. (1980): “Macroeconomics and reality”, Econometrica, 48, pp. 1-48.

TOUSSAINT, E. (2008): The US Subprime Crisis Goes Global. In Counterpunch, Weekend Edition, January 12/13.

TUDOR, C. (2011): “Changes in Stock Markets Interdependencies as a Result of the Global Financial Crisis: Empirical Investigation on the CEE Region”, Panoeconomicus, 4, pp. 525-543.