Stock market co-movement, domestic economic policy and the macroeconomic trilemma: the case of the UK (1922–2016)

This article explores the global cycle hypothesis by testing whether the US stock market serves as an explanatory variable for the evolution of expansions and contractions in the UK stock market from 1922 until 2016. Alternatively, it tests an index that groups the stock markets of advanced economies to identify whether this driving force is international. Second, regarding co-movement with the US, the article explores whether its time-varying nature is contingent on the domestic and international economic policy regimes. I find evidence that there is a strong and contemporaneous co-movement between the US and UK stock markets. Additionally, through a VAR model, I identify that the movements in the UK stock market cause, in the Granger sense, changes in the index for advanced economies up to two years later. Furthermore, in the short-run co-movement between the US and UK stock markets is contingent on the macroeconomic trilemma while, in the long run, both domestic and international policy regimes affect the relationship. A final contribution is the design of a new methodology for describing the evolution of financial time series as risk-adjusted above or below average returns to different time horizons: the Local Bull Bear Indicators (LBBIs).

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Intensity of shock transmission amid US-BRICS markets

International Journal of Emerging Markets ◽

10.1108/ijoem-04-2013-0063 ◽

2015 ◽

Vol 10 (3) ◽

pp. 311-328 ◽

Cited By ~ 5

Author(s):

P. Lakshmi ◽

S. Visalakshmi ◽

Kavitha Shanmugam

Keyword(s):

Stock Market ◽

Granger Causality ◽

Stock Markets ◽

Subprime Mortgage ◽

Content Type ◽

Brics Countries ◽

Long Run ◽

The Us ◽

The Usa ◽

Short Run

Purpose – The purpose of this paper is to analyze the intensity of transmission of shocks from USA to BRICS countries in the long-run and short-run deviations and swiftness of recovery during US subprime mortgage crisis. This analysis enables the authors to explore the evolving patterns of relationships between these markets and examine whether their co-movements altered either in response to international shocks that originated in advanced markets like USA or due to their domestic fluctuations. Design/methodology/approach – Employing data of daily stock market indices (open and close) of BRICS countries for the period January 2, 2001 to May 31, 2012, this paper examines the interactions and characteristics of price movements of BRICS with US market by applying co-integration tests, vector error correction model and Granger causality relationship. The daily stock market indices data are derived from respective stock exchange web sites. Findings – The results exhibit that both long-run co-integration relationships and short-run Granger causality relationships exist between the stock markets of US-BRICS. Furthermore, this nexus is amplified in the short-run during 2007-2009, when the subprime mortgage financial crisis in the USA cropped up. This finding lends support to the prominence of developed (US) market links in the proliferation of persistent co-movements of BRICS stock markets. Research limitations/implications – The findings imply an increasing degree of global market integration due to quick dissemination of global shocks originating from developed market like USA, and swift recovery which can be attributed to the increased resilience, consistent with the moderated level of domestically driven risk in the BRICS markets. In spite of their similarities, long-run and short-run interdependences with the US stock market exhibit differences among the BRICS. This can be attributed to the regional heterogeneity in long-run risk and return co-movements with the USA. Practical implications – Changes from the US index easily affect these stock markets in the short-run, which implies that the US index may act as a leading indicator for investing funds in BRICS markets. Originality/value – This study would enable the authors to understand whether BRICS economies actually remain resilient to adverse developments in USA and could serve as alternative investment destinations for global portfolio diversification.

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Is There a Causal Relationship Between Financial Markets in Asia and the US?

THE LAHORE JOURNAL OF ECONOMICS ◽

10.35536/lje.2017.v22.i1.a4 ◽

2017 ◽

Vol 22 (1) ◽

pp. 71-90

Author(s):

Amalendu Bhunia ◽

Devrim Yaman

Keyword(s):

Stock Market ◽

Financial Markets ◽

Causal Relationship ◽

Stock Markets ◽

Market Prices ◽

Long Run ◽

The Us ◽

Short Run ◽

International Investors ◽

Stock Values

This study examines whether there is a causal relationship between selected stock markets in Asia and the US. Based on stock values from a sample of nine Asian stock markets, we find a positive correlation with US stock market prices in most cases, the exception being Vietnam. Our results indicate significant long-run and short-run causality in both directions between the Asian and US stock markets. These findings show that, while both sets of markets are integrated, there are still valuable opportunities for international investors to diversify their portfolios in the US and Asia.

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The Impact of Monetary and Fiscal Policies on the Stock Market in the United States (U.S); Evidence from Linear ARDL Framework

11th GLOBAL CONFERENCE ON BUSINESS AND SOCIAL SCIENCES - Global Conference on Business and Social Sciences Proceeding ◽

10.35609/gcbssproceeding.2020.11(132) ◽

2020 ◽

Vol 11 (1) ◽

pp. 132-132

Author(s):

Aref Emamian

Keyword(s):

United States ◽

Stock Market ◽

The United States ◽

Real Effective Exchange Rate ◽

Annual Data ◽

Fiscal Policies ◽

Long Run ◽

The Us ◽

Short Run ◽

The Impact

This study examines the impact of monetary and fiscal policies on the stock market in the United States (US), were used. By employing the method of Autoregressive Distributed Lags (ARDL) developed by Pesaran et al. (2001). Annual data from the Federal Reserve, World Bank, and International Monetary Fund, from 1986 to 2017 pertaining to the American economy, the results show that both policies play a significant role in the stock market. We find a significant positive effect of real Gross Domestic Product and the interest rate on the US stock market in the long run and significant negative relationship effect of Consumer Price Index (CPI) and broad money on the US stock market both in the short run and long run. On the other hand, this study only could support the significant positive impact of tax revenue and significant negative impact of real effective exchange rate on the US stock market in the short run while in the long run are insignificant. Keywords: ARDL, monetary policy, fiscal policy, stock market, United States

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The Linkage between Chittagong Stock Market and Dhaka Stock Market

10.54728/2112091639050770 ◽

2021 ◽

Vol 1 (1) ◽

Author(s):

Muhammad Shahidullah Tasfiq ◽

◽

Nasrin Jahan

Keyword(s):

Stock Market ◽

Stock Markets ◽

Stock Price ◽

Impulse Response Function ◽

Decomposition Analysis ◽

Variance Decomposition ◽

Causality Test ◽

Long Run ◽

Short Run ◽

Variance Decomposition Analysis

This paper aims at determining the relationship between the two domestic stock markets of Bangladesh – the Chittagong Stock Market (CSE) and the Dhaka Stock Market (DSE). The daily stock price indices that represent the performance of the two stock markets are collected. In order to find out the interdependent relationship, the Engle-Granger Cointegration test, Granger Causality test, Impulse Response Function, and Variance Decomposition Analysis are employed in this paper. The main finding of this study is that both the stock markets are related in the long run. However, there is a one-way short-run effect from the DSE on the CSE market. The CSE market quickly responds to the shock in the DSE market. But, the DSE market is not responsive to the CSE market. The variance decomposition analysis shows that most of the shocks in the CSE market are explained by its own market. On the other hand, a small number of shocks in the DSE market are explained by the CSE market as well as its own market.

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Effect of Exchange Rate Returns on Equity Prices: Evidence from South Africa and Nigeria

International Journal of Economics and Finance ◽

10.5539/ijef.v9n11p35 ◽

2017 ◽

Vol 9 (11) ◽

pp. 35

Author(s):

Jibrin Daggash ◽

Terfa W. Abraham

Keyword(s):

South Africa ◽

Exchange Rate ◽

Stock Market ◽

Stock Exchange ◽

Equity Prices ◽

The Us ◽

Short Run ◽

Us Dollar ◽

The Exchange Rate ◽

The Uk

This paper examines the exchange rate returns of the Rand (relative to the US dollar) and the Naira (relative to the US dollar) for the presence of volatility. It also examines the effect of the exchange rate returns on the performance of their respective stock market. While it was found that the returns of the South African Rand was volatile, the Nigerian naira was not. Estimating the effect of exchange rate returns and crude oil price on the stock market indices of both countries showed that exchange rate return have a positive effect on the performance of the Nigerian stock exchange thus, confirming the stock flow hypothesis for Nigeria and refuting same for South Africa. Although the VAR granger causality identifies short run fluctuation of the naira as a significant factor affecting the performance of the Nigerian stock exchange in the short run, the Johannesburg stock exchange was found to be mostly affected by short run changes in the Rand and the UK FTSE 100. The paper concludes that policies aimed at stabilizing exchange rate and encouraing more non-oil stocks to be quoted in the Nigerian stock exchange will important. For the Johanesburg stock exchange, raising the listing requirement for firms quoted in the UK FTSE 100 and also seeking listing or already listed in the JSE will be a plausible idea. For both countries, however, curtailing swings in their exchange rate returns would help attract new investments and sustain existing ones hence, helping to spur growth.

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AN ANALYSIS OF STOCK MARKET INTEGRATION IN THE ASIAN DEVELOPED AND EMERGING MARKETS

Humanities & Social Sciences Reviews ◽

10.18510/hssr.2021.93116 ◽

2021 ◽

Vol 9 (3) ◽

pp. 1175-1190

Author(s):

Sadiq Rehman ◽

Asif Ali Abro ◽

Ahmed Raza Ul Mustafa ◽

Najeeb Ullah ◽

Sanam Wagma Khattak

Keyword(s):

Stock Market ◽

Emerging Markets ◽

Stock Markets ◽

Impulse Response Function ◽

Variance Decomposition ◽

Short Term ◽

Emerging Stock Markets ◽

Long Run ◽

Integration Test ◽

Short Run

Purpose of the study: This study investigates Short-run, Long-run, and Casual relationships in the Asian Developed and Emerging stock market indices for the period of 19 years weekly data of stock market indices of Asian Developed and Emerging Markets which are Japan (Nikkei 225), South Korea (KOSPI), Pakistan (KSE 100), China (SSE Composite), Sri Lanka (ASPI), India (BSE 200) and Malaysia (KLSE composite) from January 2001 to December 2019. Methodology: To analyze long-run and short-run relationships among the Asian developed and emerging stock markets, this study practices Descriptive Statistics, Correlation Matrix, Unit Root Test, Johansen Co-Integration Test, Vector Error Correction Model, Granger Causality test, Variance Decomposition and Impulse Response Function (IRF). Main findings: By employing the ADF and P.P. tests, the results specify that the entire variables' data are non-stationary and stationary in exact order, which is 1st difference. The Johnson Co-integration test found one cointegration relationship, where the results are consistent with Granger causality, Variance Decomposition, and Impulse Response Function (IRF). Application of the study: As the current research has focused on finding out the comovements in the Asian developed and emerging markets. So, the applications are that the survey found short-run and long-run relationships in these countries' stock markets. The study's originality: The current study has selected seven Asian developed and emerging stock markets and weekly updated time series data to investigate short-term and long-term linkages. So, this study found long-run comovements in these stock indices, which contributes to the literature. In addition, these stock markets have limited diversification benefits for international investors, while short-term diversification benefits may exist.

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Are Banks And Stock Markets Positively Related? Empirical Evidence From South Africa

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v26i6.325 ◽

2010 ◽

Vol 26 (6) ◽

Cited By ~ 1

Author(s):

Nicholas M Odhiambo

Keyword(s):

South Africa ◽

Stock Market ◽

Stock Markets ◽

Real Income ◽

Market Development ◽

Bounds Testing ◽

Critical Question ◽

Stock Market Development ◽

Long Run ◽

Short Run

<a name="OLE_LINK2"></a><a name="OLE_LINK1">In this study, we examine the relationship between banks and stock market development in South Africa.  The study attempts to answer one critical question: Are banks and stock markets positively related in South Africa? The bank development is proxied by the ratio of the domestic credit to the private sector to GDP (DCP/GDP), while the stock market development is proxied by the ratio of the stock market capitalisation to GDP (CAP/GDP).Unlike the majority of the previous studies, the current study uses the newly introduced ARDL-Bounds testing approach, as proposed by Pesaran  et al. (2001), to examine this linkage. The empirical results show that there is a distinct positive relationship between banks and stock markets in South Africa. The results apply irrespective of whether the model is estimated in the short run or in the long run. Other results show that in the short run, the stock market development in South Africa is positively determined by the level of savings, but negatively affected by the rate of inflation and the lagged values of the stock market development. However, in the long run, the stock market is positively determined by real income and the inflation rate.  </a>

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Impact of terrorism on stock markets across the world and stock returns

Journal of Financial Crime ◽

10.1108/jfc-09-2018-0093 ◽

2019 ◽

Vol 26 (3) ◽

pp. 793-807 ◽

Cited By ~ 3

Author(s):

Laila Memdani ◽

Guruprasad Shenoy

Keyword(s):

Stock Market ◽

Stock Markets ◽

Performance Measure ◽

Short Term ◽

Content Type ◽

Global Indices ◽

Long Run ◽

Short Run ◽

The Impact ◽

Affected Country

Purpose The purpose of this paper is to study the following: short-run and long-run associations between the terror-affected country’s stock market index and other global countries’ equity indices and gold; the volatility of stock market indices when one of the countries is affected by a terrorist attack; and the linkages between terrorism and the returns in the selected stock markets. Design/methodology/approach To study the impact of the Taj attack on other global indices, the authors selected top five countries’ stock market indices, namely, FTSE, DJI, NIKKEI, SSEC and DAX. The short-run and long-run associations are also compared with gold. The authors used the autoregressive distributed lag model, LM test and bounds test for analyzing the short-run and long-run impact; ARCH family models to study the volatility impact; and the MAR model to study the impact on returns. Findings The authors found that all the global indices had a short-run association with the terror-affected country’s benchmark index, i.e. BSE. Gold moved as expected, with it having a short-run impact on the terror-affected country. All the global indices except DJI have volatility of share price movement either positively or negatively. As the benchmark of the terror-affected country fell, NIKKEI, HSI, IXIC, DAX and CAC also fell; that is, it had a positive influence on the terror-affected country’s index. Post the Mumbai attacks, DJI, NIKKEI, SSEC, DAX, BSE and CAC performed well in performance measure returns compared with the pre-attack period. Whereas, FTSE and GOLD performed well in performance measure returns in the pre-attack period compared with the post-attack period. GOLD proved that it is the best avenue to invest in, as it has only a short-term association with the terror-affected country’s index. Research limitations/implications The authors studied the short-run and long-run associations with only five countries’ benchmark indices. Practical implications The authors found that all the global indices had long- and short-run associations with the terror-affected country’s benchmark index, i.e. BSE. Global indices like DJI, NIKKEI, SSEC, DAX and FTSE had a short-term association with the affected country’s index. Gold moved as expected, with it having a short-run impact on the terror-affected country. All the global indices except DJI have volatility of share price movement either positively or negatively. As the benchmark of the terror-affected country fell, NIKKEI, HSI, IXIC, DAX, TSX, BVSP and CAC also fell; i.e., it had a positive influence on the terror-affected country’s index. Post the Mumbai attacks, DJI, NIKKEI, SSEC, DAX, BSE and CAC performed well in performance measure returns compared with the pre-attack period. Whereas, FTSE and GOLD performed well in performance measure returns in the pre-attack period compared with the post-attack period. GOLD proved that it is the best avenue to invest in, as it has only a short-term association with the terror-affected country’s index. In all the relationships were mixed with respect to terror attacks, and GOLD took the lead run out of all the associations it had in the 16-year time span from 2000 to 2016. Social implications The research has got an important implication to the investors. It shows that patience is the key, as all the indices had only short-term associations with the BSE. It implies that investors’ returns will be negative in the short run, but if they continue investing, in the long run, the impact of terrorism tapers out and the returns will increase. Originality/value There is a lot of research done on the impact of the US attacks on the stock markets of other countries, but on the impact of the Taj attack in India, there is hardly any research.

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Cointegration of Asian Stock Markets: Empirical Evidence from India

International Journal of Financial Management ◽

10.21863/ijfm/2016.6.2.030 ◽

2016 ◽

Vol 6 (2) ◽

Author(s):

Beeralaguddada Srinivasa Veerappa

Keyword(s):

Stock Market ◽

Stock Returns ◽

Stock Markets ◽

Causality Test ◽

Long Run ◽

Equilibrium Relationship ◽

Short Run ◽

Auto Regressive ◽

Global Stock Markets ◽

Indian Stock Market

At present stock return is significantly related to other global stock markets. The present paper empirically investigates the short run and long run equilibrium relationship between the stock market of India, Japan Hong Kong, Singapore, Malaysia, China, and Australia monthly data during January 1995 to December 2013. Researcher employs correlation test, multivariate co-integration framework, Vector Auto Regressive error-correction model and Granger causality test with reference to financial up evils in Asia and world viz., Asian crisis (1997/98), financial crisis (2008) Inflation conditions, Natural disasters, financial up evils etc. of long run relationship. Results find that the Indian stock market return is significantly co-integrated with long run and short run situations/causalities in Asian Stock returns.

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Time–Scale Relationship between Securitized Real Estate and Local Stock Markets: Some Wavelet Evidence

Journal of Risk and Financial Management ◽

10.3390/jrfm12010016 ◽

2019 ◽

Vol 12 (1) ◽

pp. 16 ◽

Cited By ~ 3

Author(s):

Kim Hiang Liow ◽

Xiaoxia Zhou ◽

Qiang Li ◽

Yuting Huang

Keyword(s):

Real Estate ◽

Stock Market ◽

Time Scale ◽

Stock Markets ◽

Real Estate Markets ◽

Long Run ◽

Short Run ◽

The Relationship ◽

Local Stock ◽

Domestic Stock

: This study revisits the relationship between securitized real estate and local stock markets by focusing on their time-scale co-movement and contagion dynamics across five developed countries. Since securitized real estate market is an important capital component of the domestic stock market in the respective economies, it is linked to the stock market. Earlier research does not have satisfactory results, because traditional methods average different relationships over various time and frequency domains between securitized real estate and local stock markets. According to our novel wavelet analysis, the relationship between the two asset markets is time–frequency varying. The average long run real estate–stock correlation fails to outweigh the average short run correlation, indicating the real estate markets examined may have become increasingly less sensitive to the domestic stock markets in the long-run in recent years. Moreover, securitized real estate markets appear to lead stock markets in the short run, whereas stock markets tend to lead securitized real estate markets in the long run, and to a lesser degree medium-term. Finally, we find incomplete real estate and local stock market integration among the five developed economies, given only weaker long-run integration beyond crisis periods.

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