Modeling Comovement among Emerging Stock Markets: The Case of Budapest and Istanbul (original) (raw)

Comovements and linkages of emerging stock markets: A case study from OIC member countries

Journal of Economic Cooperation and Development, 2009

This paper investigates the comovements and linkages between selected Organization of the Islamic conference (OIC) stock markets. Comovement and linkages are two different phenomenon and need to be differentiated in the analyses. Time series can move together or share same path in the short or long run without linkages. Performing only cointegration analyses can mislead our result. In order to gauge out and clarify the nature or form of the relationship, multivariate cointegration test, vector error correction model and Granger causality test are employed for the daily stock market indices of Indonesia, Malaysia, Pakistan and Turkey for the period spanning from the first day of January 2000 to 24 th October, 2008. Empirical findings indicate that; (a) there is evidence for stock market linkages between Indonesia, Malaysia, Pakistan and Turkey in the sample period. (b) Turkish stock market granger cause the other sample countries` stock markets.

Modelling the relationship between developed equity markets and emerging equity markets

2014 IEEE Conference on Computational Intelligence for Financial Engineering & Economics (CIFEr), 2014

This study examines the dynamic linkages between the major equity markets of the world (USA, Japan and Britain) and the emerging markets of South-East Europe (Croatia, Slovenia and Hungary). In particular, we discuss possible differences between their interdependences during the period of the dot-com speculative bubble, as well as during the period of the existing financial crisis caused by deflation of the global "real-estate" bubble. For the purpose of this study, we perform three types of analysis. Firstly, we investigate the long-run relationships between indices by using the Johansen cointegration test. Secondly, we investigate both the short-term and long-term movements in equity markets, modelling them with a VECM. Thirdly, we test for causality between the series by using the Granger causality test. A conclusion is finally drawn that the South-East Europe equity markets have become more integrated with global markets and that they offer limited potential in diversifying the risks.

Comovements of Stock Markets between Turkey and Global Countries

2017

This paper presents empirical evidence on the dynamic structure of the correlations of the Turkish stock market with other national markets. Both conditional and unconditional correlations are analyzed. Linkages at the aggregate level are found to be time-varying, showing some transitional changes. In the analysis of the dynamics behind the transitional changes, the evidence indicates that the TED spread appears to be the most dominant factor contributing to the stock market comovements between Turkey and other global markets.

The comovements in international stock markets: new evidence from Latin American emerging countries

Applied Economics Letters, 2010

We analyze the time-variations of conditional correlations between selected Latin American emerging markets and between them and the World stock market to further shed light on the issues of capital market integration and portfolio diversification. The cross-market correlations are empirically estimated from the Engle (2002)'s DCC-GARCH model. Bai and Perron (2003)'s structural break analysis technique is also employed to test for possibly changing nature of stock market comovements. Main findings of the paper are as follows. First, the degree of cross-market comovements changed over time and has significantly increased since 1994 and onwards, which is to the large extent informative of increasing market integration. Despite the significant interdependencies among the studied markets, room for international portfolio diversification nevertheless seems largely possible. Second, it is demonstrated that the cross-market comovements are subjected to various regime shifts due essentially to major stock market events. Finally, the purpose that stock markets move much more together in times of crisis than in normal times can not be rejected according to our empirical evidence.

The emerging market crisis and stock market linkages: further evidence

Journal of Applied Econometrics, 2006

This study examines the long-run price relationship and the dynamic price transmission among the USA, Germany, and four major Eastern European emerging stock markets, with particular attention to the impact of the 1998 Russian financial crisis. The results show that both the long-run price relationship and the dynamic price transmission were strengthened among these markets after the crisis. The influence of Germany became noticeable on all the Eastern European markets only after the crisis but not before the crisis. We also conduct a rolling generalized VAR analysis to confirm the robustness of the main findings. further argue that (short-term) correlation between national stock market returns only increases temporarily in times of general market turbulence such as the 1987 crash. On the other hand, report some evidence for strengthened international stock market linkages after the 1987 crash in terms of an increased number of co-integrating vectors in the post-crash period compared to the pre-crash period.

CONDITIONAL VARIANCE INTERACTIONS BETWEEN THE STOCK EXCHANGE INDICES IN TURKEY AND THE LEADING GLOBAL FINANCIAL CENTERS

In the last thirty years, volatility modeling in financial time series has drawn considerable attention in the literature of financial econometrics. In this course, the workhorse model of volatility has been the ARCH model and its generalized counterparts. Although these models have proven to be useful in capturing some stylized facts of volatility in financial time series such as the cluster effect and have been applied to diverse areas with success such as modeling systematic risk changes in the market, asset pricing via models like I-CAPM or APT, or testing market efficiency; they have a major drawback. They are univariate. That is why, a typical ARCH or GARCH-type model allows to detect the effects of prior shocks and conditional variances in the errors of the same variable. However, thanks to a growing literature, it is now known that volatility spillovers (both in the form of shock and conditional variance transmissions) between two or more variables might exist. In this paper, I study the potential volatility interactions between the major stock exchange indices in the global financial centers and in Turkey. To be precise, the dataset includes observations on the returns of the leading indices in Turkey, UK, Germany, Japan and the US. For that purpose, I employ a multivariate model called the Extended Constant Conditional Correlation GARCH (ECCC-GARCH) model whose identification properties are developed by Nakatani and Terasvirta (N-T). ECCC-GARCH model is a useful tool because N-T have developed a powerful LR test for this model which allows to check whether there really exist volatility spillovers between the variables in a dataset or not. Results of this study indicate the existence of universal shock transmissions from the stock exchange returns in the global financial centers to those in Turkey. There also exist conditional variance interactions between the USA, UK and Turkey. These results suggest that the stock exchange in Turkey well integrated to the world but not quite suitable to be used by stock exchange investors in the USA and UK for the purpose of global risk diversification.

Emerging stock market reactions to shocks during various crisis periods

PLOS ONE

This study investigates granger causal linkages among six Asian emerging stock markets and the US market over the period 2002–2020, taking into account several crisis periods. The pairwise Granger causality tests for investigating the short-run causality show significant bi- and uni-directional causal relationships in those markets and evidence that they have become more internationally integrated after every crisis period. An exception is Bangladesh with almost no significant short-term causal linkages with other markets. For understanding, how the financial linkages amplify volatility spillover effects, we apply the GARCH-M model and find that volatility and return spillovers act very inversely over time. However, market interface is weak before the crisis periods and becomes very strong during the financial crisis and US-China economic policy uncertainty periods. The US market plays a dominant role during the financial crisis and COVID-19 periods. Further analysis using the VAR m...

Interrelationships among regional stock indices

Review of Financial Economics, 2002

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.

Effects of Stock Indices of Developed and Emerging Markets (2016)

We analyze the effect of global financial conditions of developed and emerging economies on economic activity in Colombia. To accomplish this task, we estimate financial conditions indices for the stock markets of developed and emerging countries using principal components analysis. Then, we include the estimated indices as regressors in a traditional vector autoregression (VAR) that includes series of economic activity in Colombia; that is, we carry out a factor-augmented vector autoregression (FAVAR) analysis with one unobservable factor and one observable variable accounting for real economic activity to evaluate the influence of international financial conditions on macroeconomic variables in Colombia. Using monthly data, we find that the stock market conditions of emerging economies have a positive effect on macroeconomic performance in Colombia.

Determinants of Stock Market Indices: An Analysis of Emerging Markets of Brazil, Mexico, Russia, and Turkey

EMAJ: Emerging Markets Journal

This paper investigates the dynamic relationship between the stock market index and a set of macroeconomic variables in four emerging countries. The dependent variable measures monthly stock exchange points of respective markets from January 2010 to March 2021. Independent variables consist of the 5-Year bond yields, CDS Premiums, VIX Futures, gold price, MSCI Emerging Market Index, and Oil Prices. Since the dependent and independent variables have a cointegrating relationship, we conducted our analyses in both the short and long term. Findings indicated that CDS premiums, oil and gold prices have a negative, while VIX and MSCI have a positive effect on the stock index in the long term. On the other hand, bond yields and the COVID-19 have a negative while MSCI has a positive effect in the short term. In addition, the long-term effects are much evident in Brazil and Russia. The speed of adjustment to the long-term equilibrium in the stock market index is much higher in Turkey and Mex...