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Equity market price interdependence based on bootstrap causality tests: evidence from Australia and its major trading partners

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  • Abdulnasser Hatemi-J
  • Eduardo D. Roca

Abstract

We re-examine the issue of equity market price interdependence between Australia, on one hand and Japan, US, UK, Hong Kong, Singapore, Taiwan and Korea, on the other hand, based on Hacker and Hatemi-J (2005) bootstrap Granger-causality tests with leveraged adjustments. We take into account the Asian Crisis and find that no causal linkages existed between Australia and these markets before and after the Crisis. These results imply that the transmission of information between the equity market of Australia and those of its trading partners is efficient. Given that the correlation between Australia and these markets are relatively low, these results give further confirmation that the latter group of markets can serve as good avenues for portfolio diversification by Australian investors.

Suggested Citation

  • Abdulnasser Hatemi-J & Eduardo D. Roca, 2007. "Equity market price interdependence based on bootstrap causality tests: evidence from Australia and its major trading partners," Applied Financial Economics, Taylor & Francis Journals, vol. 17(10), pages 827-835.
    • Handle: RePEc:taf:apfiec:v:17:y:2007:i:10:p:827-835
    DOI: 10.1080/09603100600722144
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    References listed on IDEAS

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    1. Paul D. McNelis, 1993. "The Response of Australian Stock, Foreign Exchange and Bond Markets to Foreign Asset Returns and Volatilities," RBA Research Discussion Papers rdp9301, Reserve Bank of Australia.
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    Cited by:

    1. Ali Koçyigit & Mustafa Ercan Kiliç & Tayfur Bayat, 2015. "A Causality Test on the Gibson Paradox in Turkey," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(10), pages 1134-1147, October.
    2. Sudharshan Reddy Paramati & Rakesh Gupta & An Hui, 2016. "Trade and Investment Linkages and Stock Market Long-Run Relationship," Australian Economic Papers, Wiley Blackwell, vol. 55(2), pages 149-169, June.
    3. Song, Yuegang & Huang, Ruixian & Paramati, Sudharshan Reddy & Zakari, Abdulrasheed, 2021. "Does economic integration lead to financial market integration in the Asian region?," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 366-377.
    4. Eduardo Roca & Gurudeo Anand Tularam, 2012. "Which way does water flow? An econometric analysis of the global price integration of water stocks," Applied Economics, Taylor & Francis Journals, vol. 44(23), pages 2935-2944, August.
    5. Sudharshan Reddy Paramati & Eduardo Roca & Rakesh Gupta, 2016. "Economic integration and stock market dynamic linkages: evidence in the context of Australia and Asia," Applied Economics, Taylor & Francis Journals, vol. 48(44), pages 4210-4226, September.

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