Horvath, Roman and Poldauf, Petr (2011): International stock market comovements: what happened during the financial crisis?
Download (830kB) | Preview
We investigate the stock market comovements in Australia, Brazil, Canada, China, Germany, Hong Kong, Japan, Russia, South Africa, the UK, and the USA, both at the market and sectoral level in 2000-2010. Using multivariate GARCH models, our results suggest that the correlation among equity returns during the financial crisis (2008-2010) somewhat increased suggesting that the crisis represented a common shock to all countries. The U.S. stock market is found to be the most correlated with the stock markets in Brazil, Canada and UK. The correlation of U.S. and Chinese stock market is esentially zero before the crisis; it becomes slightly positive during the crisis. The sectoral indices are less correlated than the market indices over the whole period, but again the correlations increase during the crisis.
|Item Type:||MPRA Paper|
|Original Title:||International stock market comovements: what happened during the financial crisis?|
|Keywords:||Financial crisis, stock market comovements, GARCH|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing ; Futures Pricing
|Depositing User:||Roman Horvath|
|Date Deposited:||10. Dec 2011 00:58|
|Last Modified:||24. Sep 2015 23:34|
Benelli, R. and S. Ganguly (2007): Financial Linkages Between the U.S. and Latin America: Evidence from Daily Data. IMF Working Papers 07/262, International Monetary Fund.
Bollerslev, T., Engle, R. F. and J. M. Wooldridge (1988): A Capital Asset Pricing Model with Time-Varying Covariances. Journal of Political Economy, 96(1), 116-131.
References Engle, R. F., and K. F. Kroner (1995): Multivariate simultaneous generalized ARCH. Econometric Theory, 11, 122–150.
Engle, R. F. and J. G. Rangel (2008): The Spline-GARCH Model for Low-Frequency Volatility and Its Global Macroeconomic Causes. Review of Financial Studies, 21(3), 1187-1222.
Forbes, K. J. and R. Rigobon (2002): No Contagion, Only Interdependence: Measuring Stock Market Comovements. The Journal of Finance 57(5): 2223-61.
Hamao, Y., R. W. Masulis, and V. Ng (1990): Correlations in Price Changes and Volatility Across International Stock Markets. The Review of Financial Studies, 3(2), 281-307.
Johnson, R. and L. Soenen (2003): Economic integration and stock market comovements in the Americas. Journal of Multinational Financial Management 13(1), 85-100.
Karolyi, G. A. (1995): Multivariate GARCH Model of International Transmissions of Stock Returns and Volatility: The Case of the United States and Canada. Journal of Business & Economic Statistics 13(1), 11-25.
King, M. A. and S. Wadhwani (1990): Transmission of Volatility Between Stock Markets. The Review of Financial Studies 3(1), 5-33.
Laurent, S., L. Bauwens, and J. V. K. Rombouts (2006): Multivariate GARCH models: a survey. Journal of Applied Econometrics 21(1), 79-109.
Longin, F. and B. Solnik (1995): Is the correlation in international equity returns constant: 1960-1990?. Journal of International Money and Finance, 14(1), 3-26.
Shoham, A. and J. Pelzman (2011): A Review of the Crises, Global Economy Journal, 11 (2), Article 5.
Sun, T. and X. Zhang (2009): Spillovers of the U.S. Subprime Financial Turmoil to Mainland China and Hong Kong SAR: Evidence from Stock Markets. IMF Working Papers 09/166, International Monetary Fund.
Theodossiou, P. and U. Lee (1993): Mean and Volatility Spillovers Across Major National Stock Markets: Further Empirical Evidence. The Journal of Financial Research 16(4), 337-350.
Worthington, A. and H. Higgs (2004): Transmission of equity returns and volatility in Asian developed and emerging markets: a multivariate GARCH analysis. International Journal of Finance and Economics 9(1), 71-80.