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Analyzing of Relationship among stock markets of the US, Germany and Turkey with MS-VAR Model

Author

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  • Emrah Ismail ÇEVIK
  • Nuket Kirci ÇEVIK
  • Serhan GURKAN

Abstract

In this study, the presence of dynamic relations among stock markets of the US, Germany and Turkey is examined by means of Markov regime switching-Vector Autoregressive (MS-VAR) model. Empirical results suggest that the MS-VAR model provides a better characterization of relation among stock markets than the linear VAR model. In addition, it is determined that regimes are obtained from the MS-VAR model can be named as bear and bull markets according to smoothed transition probabilities. Regime-dependent Granger causality test and impulse-response functions results show that the relations among the stock markets have varied due to bear and bull market periods.

Suggested Citation

  • Emrah Ismail ÇEVIK & Nuket Kirci ÇEVIK & Serhan GURKAN, 2012. "Analyzing of Relationship among stock markets of the US, Germany and Turkey with MS-VAR Model," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 6(1), pages 133-155.
    • Handle: RePEc:bdd:journl:v:6:y:2012:i:1:p:133-155
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    Keywords

    Markov Regime Switching VAR Model; Stock Markets; Regime-Dependent Impulse-Response Functions;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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