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A spatial analysis of international stock market linkages

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  • Asgharian, Hossein
  • Hess, Wolfgang
  • Liu, Lu

Abstract

We employ spatial econometrics techniques to investigate to what extent countries’ economic and geographical relations affect their stock market co-movements. Among the relations that we analyze, bilateral trade proves to be best suited to capture co-variations in returns. We find a strong effect of a unit shock to three regionally dominant countries, namely the US, the UK, and Japan, on other countries through the trade linkage. The degree of stock market dependence increases and the importance of proximity decreases over time and during recessions. We also analyze several regional crises and find a large impact of Thailand on its trade neighbors during the Asian crisis.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 37 (2013)
Issue (Month): 12 ()
Pages: 4738-4754

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Handle: RePEc:eee:jbfina:v:37:y:2013:i:12:p:4738-4754

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Keywords: Financial and economic integration; Stock market co-movements; Spatial econometrics; Spillover and feedback effects;

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Cited by:
  1. Matthias Arnold & Sebastian Stahlberg & Dominik Wied, 2013. "Modeling different kinds of spatial dependence in stock returns," Empirical Economics, Springer, vol. 44(2), pages 761-774, April.
  2. Tam, Pui Sun, 2014. "A spatial–temporal analysis of East Asian equity market linkages," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 304-327.
  3. Asgharian, Hossein & Hess, Wolfgang & Liu, Lu, 2013. "A spatial analysis of international stock market linkages," Knut Wicksell Working Paper Series 2013/3, Knut Wicksell Centre for Financial Studies, Lund University.

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