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Determinants of time varying co-movements among international stock markets during crisis and non-crisis periods

Mobarek, Asma, Muradoglub, Gulnur, Mollaha, Sabur and Jun Houa, Ai 2016. Determinants of time varying co-movements among international stock markets during crisis and non-crisis periods. Journal of Financial Stability 24 , pp. 1-11. 10.1016/j.jfs.2016.03.003

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Abstract

In this paper, we use the DCC MIDAS approach to assess the validity of the wake-up call hypothesis for developed and emerging markets during the global financial crisis (GFC). We use this approach to decompose the total correlations into short- (daily) and long-run (quarterly) correlations for the period from 1999 to 2011. We then examine the transmission mechanisms by regressing the quarterly economic, financial, and behavioral variables on the quarterly DCC-MIDAS correlations. We find that country specific factors are crisis contingent transmission mechanisms for the co-movements of emerging country pairs and mixed pairs of advanced and emerging countries during the global financial crisis. However, we do not observe wake-up calls in the transmission of the crisis among advanced country pairs. The classification of the transmission mechanisms for crisis and non-crisis periods with the different country pairs has important implications for crisis management as well as for portfolio investment strategies. Thus, our findings contribute to the discussion on the role and effectiveness of the international financial architecture.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Uncontrolled Keywords: Stock market Co-movement, Advanced and Emerging markets, Crisis, Transmission mechanisms.
Publisher: Elsevier
ISSN: 1572-3089
Funders: Jan Wallanders and Tom Hedelius Research Foundation, Handelsbanken, Sweden
Date of First Compliant Deposit: 1 November 2016
Date of Acceptance: 11 March 2016
Last Modified: 16 Mar 2020 16:20
URI: http://orca.cf.ac.uk/id/eprint/95794

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