IDEAS home Printed from https://ideas.repec.org/a/wly/revfec/v11y2002i2p91-108.html
   My bibliography  Save this article

Interrelationships among regional stock indices

Author

Listed:
  • Orawan Ratanapakorn
  • Subhash C Sharma

Abstract

This study investigates the short‐run and long‐run relationships among stock indices of the US, Europe, Asia, Latin America, and Eastern Europe–Middle East for the pre‐Asian crisis and for the crisis period. The findings from these two periods are compared and contrasted. No long‐run relationship is observed among these indices during the pre‐Asian crisis period. However, during the crisis period, one significant cointegrating vector is observed and more short‐run (i.e., causal) relations are observed in this period as compared to the pre‐crisis period. Based on the analysis, we infer that during the Asian crisis period, the globalization increased and only the European markets directly effected the US market, while the other regional markets indirectly influenced the US market via the European market. As regards the effect of shocks, we observe that during the pre‐Asian crisis period, the response of all regional markets to shocks in other markets is transitory, whereas during the crisis period, the response of the US stock market is transitory but that of EU market is permanent to all other markets.

Suggested Citation

  • Orawan Ratanapakorn & Subhash C Sharma, 2002. "Interrelationships among regional stock indices," Review of Financial Economics, John Wiley & Sons, vol. 11(2), pages 91-108.
    • Handle: RePEc:wly:revfec:v:11:y:2002:i:2:p:91-108
    DOI: 10.1016/S1059-0560(02)00103-X
    as

    Download full text from publisher

    File URL: https://doi.org/10.1016/S1059-0560(02)00103-X
    Download Restriction: no
    File URL: https://libkey.io/10.1016/S1059-0560(02)00103-X?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Yin-Wong Cheung & Kon Lai, 1999. "Macroeconomic determinants of long-term stock market comovements among major EMS countries," Applied Financial Economics, Taylor & Francis Journals, vol. 9(1), pages 73-85.
    2. Aggarwal, Reena & Inclan, Carla & Leal, Ricardo, 1999. "Volatility in Emerging Stock Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(1), pages 33-55, March.
    3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    4. Peek, Joe & Rosengren, Eric S, 1997. "The International Transmission of Financial Shocks: The Case of Japan," American Economic Review, American Economic Association, vol. 87(4), pages 495-505, September.
    5. Kam C. Chan & Benton E. Gup & Ming-Shiun Pan, 1997. "International Stock Market Efficiency and Integration: A Study of Eighteen Nations," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(6), pages 803-813.
    6. Fama, Eugene F, 1981. "Stock Returns, Real Activity, Inflation, and Money," American Economic Review, American Economic Association, vol. 71(4), pages 545-565, September.
    7. Perron, Pierre, 1988. "Trends and random walks in macroeconomic time series : Further evidence from a new approach," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 297-332.
    8. Cheung, Yin-Wong & He, Jia & Ng, Lilian K, 1997. "Common Predictable Components in Regional Stock Markets," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 35-42, January.
    9. Kam C. Chan & Benton E. Gup & Ming‐Shiun Pan, 1997. "International Stock Market Efficiency and Integration: A Study of Eighteen Nations," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(6), pages 803-813, July.
    10. Engle, Robert F & Susmel, Raul, 1993. "Common Volatility in International Equity Markets," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(2), pages 167-176, April.
    11. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
    12. Serletis, Apostolos & King, Martin, 1997. "Common Stochastic Trends and Convergence of European Union Stock Markets," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(1), pages 44-57, January.
    13. George W. Gallinger, 1994. "Causality Tests Of The Real Stock Return-Real Activity Hypothesis," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(2), pages 271-288, June.
    14. Kasa, Kenneth, 1992. "Common stochastic trends in international stock markets," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 95-124, February.
    15. Gallinger, George W, 1994. "Causality Tests of the Real Stock Return-Real Activity Hypothesis," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(2), pages 271-288, Summer.
    16. Booth, G. Geoffrey & Martikainen, Teppo & Tse, Yiuman, 1997. "Price and volatility spillovers in Scandinavian stock markets," Journal of Banking & Finance, Elsevier, vol. 21(6), pages 811-823, June.
    17. Wongbangpo, Praphan & Sharma, Subhash C., 2002. "Stock market and macroeconomic fundamental dynamic interactions: ASEAN-5 countries," Journal of Asian Economics, Elsevier, vol. 13(1), pages 27-51.
    18. Sharma, Subhash C. & Wongbangpo, Praphan, 2002. "Long-term trends and cycles in ASEAN stock markets," Review of Financial Economics, Elsevier, vol. 11(4), pages 299-315.
    19. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    20. Ripley, Duncan M, 1973. "Systematic Elements in the Linkage of National Stock Market Indices," The Review of Economics and Statistics, MIT Press, vol. 55(3), pages 356-361, August.
    21. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andres Rivas & Rahul Verma & Antonio Rodriguez & Pedro H. Albuquerque, 2023. "The Increasing Impact of Spain on the Equity Markets of Brazil, Chile and Mexico," AMSE Working Papers 2312, Aix-Marseille School of Economics, France.
    2. Nafeesa Yunus, 2016. "Modelling interactions among the housing market and key US sectors," Journal of Property Research, Taylor & Francis Journals, vol. 33(2), pages 121-146, April.
    3. Yunus, Nafeesa, 2023. "Long-run and short-run impact of the U.S. economy on stock, bond and housing markets: An evaluation of U.S. and six major economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 90(C), pages 211-232.
    4. Kian-Ping Lim & Hock-Ann Lee & Venus Khim-Sen Liew, 2003. "International Diversification Benefits in ASEAN Stock Markets: a Revisit," Finance 0308003, University Library of Munich, Germany.
    5. Lucey, Brian M. & Voronkova, Svitlana, 2005. "Russian equity market linkages before and after the 1998 crisis: evidence from time-varying and stochastic cointegration tests," BOFIT Discussion Papers 12/2005, Bank of Finland Institute for Emerging Economies (BOFIT).
    6. Lucey, Brian M. & Voronkova, Svitlana, 2005. "Russian equity market linkages before and after the 1998 crisis : evidence from time-varying and stochastic cointegration tests," BOFIT Discussion Papers 12/2005, Bank of Finland, Institute for Economies in Transition.
    7. Ravi Kashyap, 2024. "The Concentration Risk Indicator: Raising the Bar for Financial Stability and Portfolio Performance Measurement," Papers 2408.07271, arXiv.org.
    8. Dosse Toulaboe, 2022. "Cointegration of Equity Markets in Three Country Groups of OECD Countries," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 10(1), pages 11-31.
    9. Kim Hiang Liow, 2006. "The Dynamics of Return Volatilty and Systematic Risk in International Real Estate Security Markets," Journal of Property Research, Taylor & Francis Journals, vol. 24(1), pages 1-29, November.
    10. Nafeesa Yunus, 2023. "Co‐movement among oil, stock, bond, and housing markets: An analysis of U.S., Asian, and European economies," International Review of Finance, International Review of Finance Ltd., vol. 23(2), pages 393-436, June.
    11. repec:zbw:bofitp:2005_012 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ratanapakorn, Orawan & Sharma, Subhash C., 2002. "Interrelationships among regional stock indices," Review of Financial Economics, Elsevier, vol. 11(2), pages 91-108.
    2. Sharma, Subhash C. & Wongbangpo, Praphan, 2002. "Long-term trends and cycles in ASEAN stock markets," Review of Financial Economics, Elsevier, vol. 11(4), pages 299-315.
    3. Subhash C. Sharma & Praphan Wongbangpo, 2002. "Long‐term trends and cycles in ASEAN stock markets," Review of Financial Economics, John Wiley & Sons, vol. 11(4), pages 299-315.
    4. Syriopoulos, Theodore, 2011. "Financial integration and portfolio investments to emerging Balkan equity markets," Journal of Multinational Financial Management, Elsevier, vol. 21(1), pages 40-54, February.
    5. Wongbangpo, Praphan & Sharma, Subhash C., 2002. "Stock market and macroeconomic fundamental dynamic interactions: ASEAN-5 countries," Journal of Asian Economics, Elsevier, vol. 13(1), pages 27-51.
    6. Jiranyakul, Komain, 2009. "Economic Forces and the Thai Stock Market, 1993-2007," MPRA Paper 57368, University Library of Munich, Germany.
    7. Claudeci Da Silva & Hugo Agudelo Murillo & Joaquim Miguel Couto, 2014. "Early Warning Systems: Análise De Ummodelo Probit De Contágio De Crise Dos Estados Unidos Para O Brasil(2000-2010)," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 110, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    8. Giorgio Canarella & Stephen M. Miller & Stephen K. Pollard, 2008. "Dynamic Stock Market Interactions between the Canadian, Mexican, and the United States Markets: The NAFTA Experience," Working papers 2008-49, University of Connecticut, Department of Economics.
    9. Samitas, Aristeidis G. & Kenourgios, Dimitris F., 2005. "Entrepreneurship, small and medium size business markets and European economic integration," Journal of Policy Modeling, Elsevier, vol. 27(3), pages 363-374, April.
    10. Gupta, Rakesh & Yuan, Tian & Roca, Eduardo, 2016. "Linkages between the ADR market and home country macroeconomic fundamentals: Evidence in the context of the BRICs," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 230-239.
    11. Chen, Gong-meng & Firth, Michael & Meng Rui, Oliver, 2002. "Stock market linkages: Evidence from Latin America," Journal of Banking & Finance, Elsevier, vol. 26(6), pages 1113-1141, June.
    12. Mohammad Joarder & Monir Ahmed & Tahsina Haque & Syed Hasanuzzaman, 2014. "An empirical testing of informational efficiency in Bangladesh capital market," Economic Change and Restructuring, Springer, vol. 47(1), pages 63-87, February.
    13. Ramya Rajajagadeesan Aroul & Peggy E. Swanson, 2018. "Linkages Between the Foreign Exchange Markets of BRIC Countries—Brazil, Russia, India and China—and the USA," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(3), pages 333-353, December.
    14. Solarin Sakiru Adebola & Jauhari Dahalan, 2012. "An Empirical Analysis of Stock Markets Integration in Selected African Countries," EuroEconomica, Danubius University of Galati, issue 2(31), pages 166-177, May.
    15. Erie Febrian & Aldrin Herwany, 2009. "Volatility Forecasting Models and Market Co-Integration: A Study on South-East Asian Markets," Working Papers in Economics and Development Studies (WoPEDS) 200911, Department of Economics, Padjadjaran University, revised Sep 2009.
    16. Laopodis, Nikiforos T., 2005. "Portfolio diversification benefits within Europe: Implications for a US investor," International Review of Financial Analysis, Elsevier, vol. 14(4), pages 455-476.
    17. Cheung, Yin-Wong & Ng, Lilian K., 1998. "International evidence on the stock market and aggregate economic activity," Journal of Empirical Finance, Elsevier, vol. 5(3), pages 281-296, September.
    18. Hirak Ray & Malay Kanti Ray & Joydeep Biswas, 2009. "Bank, Market and Economic Growth," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 10(2), pages 403-428, July.
    19. Mat Isa, Norshamshina & Abdullah, Azrul & Hassan, Zunairah, 2012. "Relationship between Macroeconomic Variables and Malaysia Available Shariah Indices," MPRA Paper 69397, University Library of Munich, Germany.
    20. Xiao‐Ming Li, 2006. "A Revisit Of International Stock Market Linkages: New Evidence From Rank Tests For Nonlinear Cointegration," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(2), pages 174-197, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:revfec:v:11:y:2002:i:2:p:91-108. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)1873-5924 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.