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Analyzing Heterogeneous Stock Price Comovements Through Hybrid Approaches

Author

Listed:
  • Souhir Chlibi

    (University of Tunis El Manar
    University of Evry)

  • Fredj Jawadi

    (University of Evry)

  • Mohamed Sellami

    (EDC Paris Business School)

Abstract

This paper studies the hypothesis of stock price comovements between the US market and four different regions (the G6, the BRICS, the MENA (Middle East North Africa) during calm and crisis periods. Using different econometric approaches (BEKK-GARCH model, cointegration tests, and panel cointegration tests), we checked the interdependence of these markets in the short and the long term. Our findings point to the importance of heterogeneity linked to the stock price adjustment process, inviting individual analysis to be carried out according to market specificities in the aim of identifying countries that are sources of investment opportunities. We also highlighted the presence of time-varying stock price comovements that significantly increased after the subprime crisis. This enabled us to specify periods and regions that can still provide promising diversification benefits. Investigation of this issue is of interest for investors and bankers in order to improve their portfolio choices, diversification strategies as well as risk management.

Suggested Citation

  • Souhir Chlibi & Fredj Jawadi & Mohamed Sellami, 2016. "Analyzing Heterogeneous Stock Price Comovements Through Hybrid Approaches," Open Economies Review, Springer, vol. 27(3), pages 541-559, July.
    • Handle: RePEc:kap:openec:v:27:y:2016:i:3:d:10.1007_s11079-015-9381-9
    DOI: 10.1007/s11079-015-9381-9
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    3. Chlibi Souhir & Jawadi Fredj & Sellami Mohamed, 2017. "Modeling threshold effects in stock price co-movements: a vector nonlinear cointegration approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(1), pages 47-63, February.

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    More about this item

    Keywords

    Stock price comovements; Diversification; BEKK-GARCH; Vector time series and panel cointegration;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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