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Political crises and the stock market integration of emerging markets

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  • Frijns, Bart
  • Tourani-Rad, Alireza
  • Indriawan, Ivan

Abstract

This paper investigates the role of political crises in explaining the degree of stock market integration in emerging markets over the period 1991–2006. Using the International Crisis Behavior database, which contains detailed information on political crises around the world, and employing data on more than 15,500 firms, we assess whether political crises affect stock market integration in 19 emerging markets in South and East Asia, Latin America, and Central and Eastern Europe. We conclude that crises with certain characteristics generally reduce the level of stock market integration in these regions. In particular, the beginning of a political crisis, its severity, the involvement of the US in the conflict, and the number of parties involved in a crisis all have impacts on the level of stock market integration in these markets.

Suggested Citation

  • Frijns, Bart & Tourani-Rad, Alireza & Indriawan, Ivan, 2012. "Political crises and the stock market integration of emerging markets," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 644-653.
    • Handle: RePEc:eee:jbfina:v:36:y:2012:i:3:p:644-653
    DOI: 10.1016/j.jbankfin.2011.05.007
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    15. Attig, Najah & Guedhami, Omrane & Nazaire, Gregory & Sy, Oumar, 2023. "What explains the benefits of international portfolio diversification?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
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    17. Narayan, S. & Le, T.-H. & Sriananthakumar, S., 2018. "The influence of terrorism risk on stock market integration: Evidence from eight OECD countries," International Review of Financial Analysis, Elsevier, vol. 58(C), pages 247-259.
    18. Wajid Alim & Naqib Ullah Khan & Vince Wanhao Zhang & Helen Huifen Cai & Alexey Mikhaylov & Qiong Yuan, 2024. "Influence of political stability on the stock market returns and volatility: GARCH and EGARCH approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-17, December.
    19. Audi, Marc & Ehsan, Rehan & Ali, Amjad, 2022. "Does Globalization Promote Financial Integration in South Asian Economies? Unveiling the Role of Monetary and Fiscal Performance in Internationalization," MPRA Paper 119365, University Library of Munich, Germany, revised 2023.
    20. Ji, Qiang & Bouri, Elie & Roubaud, David, 2018. "Dynamic network of implied volatility transmission among US equities, strategic commodities, and BRICS equities," International Review of Financial Analysis, Elsevier, vol. 57(C), pages 1-12.
    21. Niţoi, Mihai & Pochea, Maria Miruna, 2016. "Testing financial markets convergence in Central and Eastern Europe: A non-linear single factor model," Economic Systems, Elsevier, vol. 40(2), pages 323-334.
    22. Benlagha, Noureddine, 2020. "Stock market dependence in crisis periods: Evidence from oil price shocks and the Qatar blockade," Research in International Business and Finance, Elsevier, vol. 54(C).
    23. George S. Atsalakis & Eftychios E. Protopapadakis & Kimon P. Valavanis, 2016. "Stock trend forecasting in turbulent market periods using neuro-fuzzy systems," Operational Research, Springer, vol. 16(2), pages 245-269, July.
    24. Sriananthakumar, Sivagowry & Narayan, Seema, 2015. "Are prolonged conflict and tension deterrents for stock market integration? The case of Sri Lanka," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 504-520.
    25. Najam, Najam Ul Sabeeh & Mehmood, Arshad Mehmood, 2019. "The economic cost of terrorism and natural disasters: A deeper analysis of the financial market markets of Pakistan," MPRA Paper 92278, University Library of Munich, Germany.

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    More about this item

    Keywords

    Stock market integration; International crises; Emerging markets;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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