An Inquiry on the Evidence of Comovements Among Various Stock Market Returns

This paper analyses possible comovements among major financial market returns for the period between January 1986 and June 1997. The basic findings of this paper are; among the developed country stock exchanges only the US-UK appears to have a common movement in the long run; stock exchanges of Mexico and the Philippines reflect a “pivotal” character since their returns tend to cointegrate with a number of market returns representing different level of development and regional characteristics; markets of the same regions such as the Latin Region or the Far East Region show a comovement of returns while this is not true for Greece and Turkish stock exchanges; further investigation related with the Japanese stock exchange should be carried on since the results pertaining to Japan might be an indication of international portfolios were used to be hedged on this market. This paper is important because it applies the state-of-the-art namely Dynamic Ordinary Least Squares over the returns of various stock markets and because it investigates the long run returns of the Istanbul Stock Exchange in relation with a number of stock markets.