Are the stock indices of FTSE Malaysia, China and USA causally linked together ?

Nasir, Nur Alissa and Masih, Mansur (2018): Are the stock indices of FTSE Malaysia, China and USA causally linked together ?

Abstract

In this paper, we test the causal linkages among the FTSE Malaysia, FTSE China and FTSE USA stock market indices. The investigation is conducted using the standard time series econometric techniques using monthly data. The issue is approached from two perspectives: (i) whether these markets move together (ii) and the dynamic linkages of the lead-lag relationships. Our analysis finds one significant cointegrating relationship among the selected markets, with the FTSE Malaysia being the follower and the FTSE China being being the most leading one. These findings tend to suggest that the FTSE Stock Indices of these three markets have a strong long-run equilibrium relationship mostly driven by fundamental elements of the economy. In addition, the strong leading role of the FTSE China Index implies that the China market may have a strong influence over the other regional markets. These findings have strong policy implications.

• Item Type: MPRA Paper
• Language: English
• Keywords: FTSE stock indices, causal linkages, VECM, VDC
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy

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