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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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    References listed on IDEAS

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    5. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
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    7. Pierluigi Bologna & Laura Cavallo, 2002. "Does the introduction of stock index futures effectively reduce stock market volatility? Is the 'futures effect' immediate? Evidence from the Italian stock exchange using GARCH," Applied Financial Economics, Taylor & Francis Journals, vol. 12(3), pages 183-192.
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    More about this item

    Keywords

    Markov Regime Switching VAR Model; Stock Markets; Regime-Dependent Impulse-Response Functions;

    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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