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Short-term and long-term Interconnectedness of stock returns in Western Europe and the global market

Author

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  • Ajaya Kumar Panda

    (National Institute of Industrial Engineering)

  • Swagatika Nanda

    (University of Hyderabad, Central University)

Abstract

Background The present study examines the short term dynamics and long term equilibrium relationship among the stock markets of 17 countries in Western Europe as well as the world market, using time series techniques. Methods Weekly returns of market benchmark indices of the respective countries are used from the second week of 1995 to the fourth week of December 2013. Results The study finds that the market returns of Austria, Belgium, the Netherlands, and France are relatively less dynamically interlinked as compared with Britain, Denmark, Finland, Germany, Portugal, Spain, Sweden, Switzerland, Greece, Ireland, Luxembourg, and Norway, which are quite dynamically interlinked within the region as well as with the MSCI world index. Conclusion There exists a strong long run equilibrium relationship between the return distributions of the stock markets within the region.

Suggested Citation

  • Ajaya Kumar Panda & Swagatika Nanda, 2017. "Short-term and long-term Interconnectedness of stock returns in Western Europe and the global market," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 3(1), pages 1-24, December.
    • Handle: RePEc:spr:fininn:v:3:y:2017:i:1:d:10.1186_s40854-016-0051-8
    DOI: 10.1186/s40854-016-0051-8
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    More about this item

    Keywords

    Stock market interlinkages; Cointegration; VAR; VECM; MSCI;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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