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A note on modeling world equity markets with nonsynchronous data

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  • Resnick, Bruce G.
  • Shoesmith, Gary L.

Abstract

We investigate information transmission in world equity markets using lengthy time series of daily data for nine developed equity markets over the 1999–2014 (post-Euro) time interval. Three nine-variable systems are examined, including stock indexes in both local currency and US dollars plus foreign exchange rates. After finding only weak evidence of cointegration in the three nine-variable systems, vector autoregression models are used to identify which price indexes drive the others. Our initial tests are consistent with earlier findings; that is, the US market appears to be the clear price leader. However, after constructing alternative models with the US data series lagged one period (making it the first market reported each day rather than the last), the results are reversed; the US is no longer the price leader. The US market is driven by nearly all other markets, while making little or no impact on the others. Thus, in earlier studies using nonsynchronous data reported by calendar date, it only appears that the US drives other stock markets, when in fact the US is merely an equal participant in information transmission around the world.

Suggested Citation

  • Resnick, Bruce G. & Shoesmith, Gary L., 2017. "A note on modeling world equity markets with nonsynchronous data," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 51(C), pages 125-132.
    • Handle: RePEc:eee:intfin:v:51:y:2017:i:c:p:125-132
    DOI: 10.1016/j.intfin.2017.05.010
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    References listed on IDEAS

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    Cited by:

    1. Григорьев Р.А., 2019. "Одновременные Эффекты Несинхронных Временных Рядов: Проблемы Var-Модели," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 55(2), pages 118-129, апрель.
    2. Dejan Živkov & Marina Gajic-Glamoclija & Jasmina Duraskovic & Mirela Momcilovic, 2022. "Assessing Permanent and Transitory Volatility Spillover Effect from Oil to Stocks in Baltic and Visegrad Countries," Journal of Economics / Ekonomicky casopis, Institute of Economic Research, Slovak Academy of Sciences, vol. 70(6), pages 523-542, June.

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    More about this item

    Keywords

    Equity markets; Information transmission; Multivariate cointegration; Error correction modeling; Vector autoregression;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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