Comovement in international equity markets: A sectoral view
AbstractWe investigate shifts in correlation patterns among international equity returns at the market level as well as the industry level. We develop a novel bivariate GARCH model for equity returns with a smoothly time- varying correlation and then derive a Lagrange Multiplier statistic to test the constant-correlation hypothesis directly. Applying the test to weekly data from Germany, Japan, the UK and the US in the period 1980- 2000, we find that correlations among the German, UK and US stock markets have doubled, whereas Japanese correlations have remained the same. Both dates of change and speeds of adjustment vary widely across countries and sectors.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 24 (2005)
Issue (Month): 5 (September)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30443
Other versions of this item:
- R-P. Berben & W.J. Jansen, 2001. "Comovement in International Equity Markets: a Sectoral View," MEB Series (discontinued) 2001-11, Netherlands Central Bank, Monetary and Economic Policy Department.
- Robert-Paul Berben & W. Jos Jansen, 2003. "Comovement in international equity markets: A sectoral view," Finance 0310001, EconWPA.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- G. William Schwert, 2001.
"Stock Volatility in the New Millennium: How Wacky Is Nasdaq?,"
NBER Working Papers
8436, National Bureau of Economic Research, Inc.
- William Schwert, G., 2002. "Stock volatility in the new millennium: how wacky is Nasdaq?," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 3-26, January.
- Roll, Richard, 1992. " Industrial Structure and the Comparative Behavior of International Stock Market Indices," Journal of Finance, American Finance Association, vol. 47(1), pages 3-41, March.
- Giancarlo Corsetti & Marcello Pericoli & Massimo Sbracia, 2001.
"Correlation Analysis of Financial Contagion: What One Should Know Before Running a Test,"
822, Economic Growth Center, Yale University.
- Giancarlo Corsetti & Marcello Pericoli & Massimo Sbracia, 2001. "Correlation Analysis of Financial Contagion: What One Should Know before Running a Test," Temi di discussione (Economic working papers) 408, Bank of Italy, Economic Research and International Relations Area.
- Griffin, John M. & Andrew Karolyi, G., 1998.
"Another look at the role of the industrial structure of markets for international diversification strategies,"
Journal of Financial Economics,
Elsevier, vol. 50(3), pages 351-373, December.
- John M. Griffin & G. Andrew Karolyi, . "Another Look at the Role of the Industrial Structure of Markets for International Diversification Strategies," Research in Financial Economics 9608, Ohio State University.
- William Goetzmann & Lingfeng Li & K. Rouwenhorst, 2001.
"Long-Term Global Market Correlations,"
Yale School of Management Working Papers
ysm237, Yale School of Management, revised 01 Jan 2008.
- William N.Goetzmann & Lingfeng Li & K.Geert Rouwenhorst, 2003. "Long-Term Global Market Correlations," DNB Staff Reports (discontinued) 98, Netherlands Central Bank.
- William N. Goetzmann & Lingfeng Li & K. Geert Rouwenhorst, 2001. "Long-Term Global Market Correlations," NBER Working Papers 8612, National Bureau of Economic Research, Inc.
- Lundbergh, Stefan & Terasvirta, Timo, 2002.
"Evaluating GARCH models,"
Journal of Econometrics,
Elsevier, vol. 110(2), pages 417-435, October.
- Stefan Lundbergh & Timo Teräsvirta, 1999. "Evaluating GARCH Models," Tinbergen Institute Discussion Papers 99-008/4, Tinbergen Institute.
- Lundbergh, Stefan & Teräsvirta, Timo, 1998. "Evaluating GARCH models," Working Paper Series in Economics and Finance 292, Stockholm School of Economics, revised 03 May 1999.
- G. Andrew Karolyi & Rene M. Stulz, 2002.
"Are Financial Assets Priced Locally or Globally?,"
NBER Working Papers
8994, National Bureau of Economic Research, Inc.
- Lin, Chien-Fu Jeff & Terasvirta, Timo, 1994. "Testing the constancy of regression parameters against continuous structural change," Journal of Econometrics, Elsevier, vol. 62(2), pages 211-228, June.
- Rangvid, Jesper, 2001. "Increasing convergence among European stock markets?: A recursive common stochastic trends analysis," Economics Letters, Elsevier, vol. 71(3), pages 383-389, June.
- Hansen, B.E., 1991.
"Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis,"
RCER Working Papers
296, University of Rochester - Center for Economic Research (RCER).
- Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March.
- King, Mervyn & Sentana, Enrique & Wadhwani, Sushil, 1994.
"Volatility and Links between National Stock Markets,"
Econometric Society, vol. 62(4), pages 901-33, July.
- Mervyn King & Enrique Sentana & Sushil Wadhwani, 1990. "Volatiltiy and Links Between National Stock Markets," NBER Working Papers 3357, National Bureau of Economic Research, Inc.
- Richardson, Matthew P & Smith, Tom, 1994. "A Unified Approach to Testing for Serial Correlation in Stock Returns," The Journal of Business, University of Chicago Press, vol. 67(3), pages 371-99, July.
- Franses,Philip Hans & Dijk,Dick van, 2000.
"Non-Linear Time Series Models in Empirical Finance,"
Cambridge University Press, number 9780521770415, October.
- Franses,Philip Hans & Dijk,Dick van, 2000. "Non-Linear Time Series Models in Empirical Finance," Cambridge Books, Cambridge University Press, number 9780521779654, October.
- Kristin J. Forbes & Roberto Rigobon, 2002.
"No Contagion, Only Interdependence: Measuring Stock Market Comovements,"
Journal of Finance,
American Finance Association, vol. 57(5), pages 2223-2261, October.
- Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
- Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993.
" On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks,"
Journal of Finance,
American Finance Association, vol. 48(5), pages 1779-1801, December.
- Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993. "On the relation between the expected value and the volatility of the nominal excess return on stocks," Staff Report 157, Federal Reserve Bank of Minneapolis.
- Y. K. Tse & Albert K. C. Tsui, 2000.
"A Multivariate GARCH Model with Time-Varying correlations,"
- Y.K. Tse & Albert K.C. Tsui, 2000. "A Multivariate GARCH Model with Time-Varying Correlations," Econometrics 0004007, EconWPA.
- Yiu Kuen Tse & Albert K. C. Tsui, 2000. "A Multivariate GARCH Model with Time-Varying Correlations," Econometric Society World Congress 2000 Contributed Papers 0250, Econometric Society.
- Robert F. Engle & Kevin Sheppard, 2001.
"Theoretical and Empirical properties of Dynamic Conditional Correlation Multivariate GARCH,"
NBER Working Papers
8554, National Bureau of Economic Research, Inc.
- Engle, Robert F & Sheppard, Kevin K, 2001. "Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH," University of California at San Diego, Economics Working Paper Series qt5s2218dp, Department of Economics, UC San Diego.
- Heston, Steven L. & Rouwenhorst, K. Geert, 1994. "Does industrial structure explain the benefits of international diversification?," Journal of Financial Economics, Elsevier, vol. 36(1), pages 3-27, August.
- Booth, G. Geoffrey & Martikainen, Teppo & Tse, Yiuman, 1997. "Price and volatility spillovers in Scandinavian stock markets," Journal of Banking & Finance, Elsevier, vol. 21(6), pages 811-823, June.
- Bollerslev, Tim, 1990. "Modelling the Coherence in Short-run Nominal Exchange Rates: A Multivariate Generalized ARCH Model," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 498-505, August.
- Luis CatÃ£o & Robin Brooks, 2000. "The New Economy and Global Stock Return," IMF Working Papers 00/216, International Monetary Fund.
- François Longin, 2001. "Extreme Correlation of International Equity Markets," Journal of Finance, American Finance Association, vol. 56(2), pages 649-676, 04.
- Tse, Y. K., 2000.
"A test for constant correlations in a multivariate GARCH model,"
Journal of Econometrics,
Elsevier, vol. 98(1), pages 107-127, September.
- Tom Doan, . "TSECCTEST: RATS procedure to perform Tse test for constant correlation in MV-GARCH model," Statistical Software Components RTS00214, Boston College Department of Economics.
- Tom Doan, . "RATS programs to replicate Tse's constant correlation GARCH test results," Statistical Software Components RTZ00161, Boston College Department of Economics.
- Roll, R., 1989. "Price Volatility, International Market Links, And Their Implications For Regulatory Policies," Papers t10, Columbia - Center for Futures Markets.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.