IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Dynamic relationships between industry returns and stock market returns

  • Lee, Chien-Chiang
  • Chen, Mei-Ping
  • Chang, Chi-Hung

Different from prior studies which concentrate on the unidirectional impact of industry leading, this study examines the bi-directional dynamical causal relation between industry returns and stock market returns by considering multiple structural breaks for ten major eastern and southern Asia countries. Our results show that finance and consumer service industry returns have significant power in explaining the movements of market returns. Further, we apply logit regressions to explore the determinants of the leading hypotheses and find exchange rate and interest rate are important in explaining the industry–market nexus. In a developed market the industry and the market have feedback relations, but in a highly controlled economy the influence from the stock market dominates.

If 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.

File URL: http://www.sciencedirect.com/science/article/pii/S1062940813000739
Download Restriction: Full text for ScienceDirect subscribers only

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.

Article provided by Elsevier in its journal The North American Journal of Economics and Finance.

Volume (Year): 26 (2013)
Issue (Month): C ()
Pages: 119-144

as
in new window

Handle: RePEc:eee:ecofin:v:26:y:2013:i:c:p:119-144
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620163

References listed on IDEAS
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.:

as in new window
  1. Barry Eichengreen & Poonam Gupta, 2010. "The Service Sector as India’s Road to Economic Growth?," Working Papers id:2604, eSocialSciences.
  2. Qiming Wang, 2010. "Price clustering of IPOs in the secondary market," Applied Economics Letters, Taylor & Francis Journals, vol. 17(13), pages 1285-1292.
  3. Torres, Alberto & Vela, Oscar, 2003. "Trade integration and synchronization between the business cycles of Mexico and the United States," The North American Journal of Economics and Finance, Elsevier, vol. 14(3), pages 319-342, December.
  4. Kyoji Fukao & Tsutomu Miyagawa & Kentaro Mukai & Yukio Shinoda & Konomi Tonogi, 2009. "Intangible Investment In Japan: Measurement And Contribution To Economic Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 717-736, 09.
  5. Kaul, Gautam, 1987. "Stock returns and inflation : The role of the monetary sector," Journal of Financial Economics, Elsevier, vol. 18(2), pages 253-276, June.
  6. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
  7. Zhongjun Qu & Pierre Perron, 2007. "Estimating and Testing Structural Changes in Multivariate Regressions," Econometrica, Econometric Society, vol. 75(2), pages 459-502, 03.
  8. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  9. Lee, Chien-Chiang, 2013. "Insurance And Real Output: The Key Role Of Banking Activities," Macroeconomic Dynamics, Cambridge University Press, vol. 17(02), pages 235-260, March.
  10. Jongwanich, Juthathip & Park, Donghyun, 2009. "Inflation in developing Asia," Journal of Asian Economics, Elsevier, vol. 20(5), pages 507-518, September.
  11. Chen, Hsiu-Lang & De Bondt, Werner, 2004. "Style momentum within the S&P-500 index," Journal of Empirical Finance, Elsevier, vol. 11(4), pages 483-507, September.
  12. Vassalou, Maria, 2003. "News related to future GDP growth as a risk factor in equity returns," Journal of Financial Economics, Elsevier, vol. 68(1), pages 47-73, April.
  13. Chia-Lin Chang & Michael McAleer & Roengchai Tansuchat, 2011. "Conditional Correlations and Volatility Spillovers Between Crude Oil and Stock Index Returns," Documentos de Trabajo del ICAE 2011-34, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
  14. Dale W. Jorgenson & Koji Nomura, 2005. "The Industry Origins of Japanese Economic Growth," NBER Working Papers 11800, National Bureau of Economic Research, Inc.
  15. Johnson, Simon & Mitton, Todd, 2003. "Cronyism and capital controls: evidence from Malaysia," Journal of Financial Economics, Elsevier, vol. 67(2), pages 351-382, February.
  16. Ivo Welch & Amit Goyal, 2008. "A Comprehensive Look at The Empirical Performance of Equity Premium Prediction," Review of Financial Studies, Society for Financial Studies, vol. 21(4), pages 1455-1508, July.
  17. Chen, Gong-meng & Firth, Michael & Meng Rui, Oliver, 2002. "Stock market linkages: Evidence from Latin America," Journal of Banking & Finance, Elsevier, vol. 26(6), pages 1113-1141, June.
  18. 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.
  19. Norlela Ariffin & Paulo Figueiredo, 2004. "Internationalization of innovative capabilities: counter-evidence from the electronics industry in Malaysia and Brazil," Oxford Development Studies, Taylor & Francis Journals, vol. 32(4), pages 559-583.
  20. Serra, Ana Paula, 2000. "Country and industry factors in returns: evidence from emerging markets' stocks," Emerging Markets Review, Elsevier, vol. 1(2), pages 127-151, September.
  21. Li Yang & Francis Tapon & Yiguo Sun, 2006. "International correlations across stock markets and industries: trends and patterns 1988-2002," Applied Financial Economics, Taylor & Francis Journals, vol. 16(16), pages 1171-1183.
  22. Dossani, Rafiq & Kenney, Martin, 2007. "The Next Wave of Globalization: Relocating Service Provision to India," World Development, Elsevier, vol. 35(5), pages 772-791, May.
  23. John Y. Campbell & Samuel B. Thompson, 2008. "Predicting Excess Stock Returns Out of Sample: Can Anything Beat the Historical Average?," Review of Financial Studies, Society for Financial Studies, vol. 21(4), pages 1509-1531, July.
  24. Gelain, Paolo, 2010. "The external finance premium in the Euro area: A dynamic stochastic general equilibrium analysis," The North American Journal of Economics and Finance, Elsevier, vol. 21(1), pages 49-71, March.
  25. Fu-Lai Tony Yu, 2009. "Taiwan's Entrepreneurs and International Coordination: Evolution of Global Production Network in Electronics and IT Industries," Global Economic Review, Taylor & Francis Journals, vol. 38(1), pages 49-62.
  26. Geert Bekaert & Campbell R. Harvey & Christian T. Lundblad, 2003. "Equity market liberalization in emerging markets," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 53-74.
  27. Bekaert, Geert & Urias, Michael S, 1996. " Diversification, Integration and Emerging Market Closed-End Funds," Journal of Finance, American Finance Association, vol. 51(3), pages 835-69, July.
  28. Lee, Chien-Chiang & Huang, Wei-Ling & Yin, Chun-Hao, 2013. "The dynamic interactions among the stock, bond and insurance markets," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 28-52.
  29. Kelly Bird & Sandy Cuthbertson & Hal Hill, 2007. "Making Trade Policy in a New Democracy after a Deep Crisis: Indonesia," Departmental Working Papers 2007-01, The Australian National University, Arndt-Corden Department of Economics.
  30. Lin, Chihuang H. & Shiu, Cheng-Yi, 2003. "Foreign ownership in the Taiwan stock market--an empirical analysis," Journal of Multinational Financial Management, Elsevier, vol. 13(1), pages 19-41, February.
  31. Tessitore, Anthony & Usmen, Nilufer, 2005. "Relative importance of industry and country factors in security returns," Global Finance Journal, Elsevier, vol. 16(1), pages 16-25, August.
  32. Kim, J.W. & Leatham, D.J. & Bessler, D.A., 2007. "REITs' dynamics under structural change with unknown break points," Journal of Housing Economics, Elsevier, vol. 16(1), pages 37-58, March.
  33. Chikashi Tsuji, 2012. "Do industries contain predictive information for the Fama--French factors?," Quantitative Finance, Taylor & Francis Journals, vol. 12(6), pages 969-991, March.
  34. Geske, Robert & Roll, Richard, 1983. " The Fiscal and Monetary Linkage between Stock Returns and Inflation," Journal of Finance, American Finance Association, vol. 38(1), pages 1-33, March.
  35. Hong, Harrison & Torous, Walter & Valkanov, Rossen, 2007. "Do industries lead stock markets?," Journal of Financial Economics, Elsevier, vol. 83(2), pages 367-396, February.
  36. Dodgson, Mark & Mathews, John & Kastelle, Tim & Hu, Mei-Chih, 2008. "The evolving nature of Taiwan's national innovation system: The case of biotechnology innovation networks," Research Policy, Elsevier, vol. 37(3), pages 430-445, April.
  37. 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.
  38. Woo, Chi-Keung & Horowitz, Ira & Tishler, Asher, 2006. "A critical assessment of the Hong Kong Government's proposed post-2008 regulatory regime for local electricity utilities," Energy Policy, Elsevier, vol. 34(13), pages 1451-1456, September.
  39. Luk, Stephen, 2007. "A further assessment of the Hong Kong Government's proposed post-2008 regulatory regime for local electricity utilities," Energy Policy, Elsevier, vol. 35(3), pages 1423-1425, March.
  40. Ritter, Jay R., 2005. "Economic growth and equity returns," Pacific-Basin Finance Journal, Elsevier, vol. 13(5), pages 489-503, November.
  41. Lee, Chien-Chiang & Chang, Chun-Ping, 2005. "Structural breaks, energy consumption, and economic growth revisited: Evidence from Taiwan," Energy Economics, Elsevier, vol. 27(6), pages 857-872, November.
  42. Ito, Hiro, 2006. "Financial development and financial liberalization in Asia: Thresholds, institutions and the sequence of liberalization," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 303-327, December.
  43. Cliff Huang & Tsu-Tan Fu, 2009. "Uncertainty and total factor productivity in the Taiwanese banking industry," Applied Financial Economics, Taylor & Francis Journals, vol. 19(9), pages 753-766.
  44. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
  45. Raju, Sudhakar S. & Melo, Alberto, 2003. "Money, real output, and deficit effects of coffee booms in Colombia," Journal of Policy Modeling, Elsevier, vol. 25(9), pages 963-983, December.
  46. Wang, Chaug-Jung & Lee, Chien-Hui & Huang, Bwo-Nung, 2003. "An analysis of industry and country effects in global stock returns: evidence from Asian countries and the U.S," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(3), pages 560-577.
  47. Park, Kang H. & Weber, William L., 2006. "A note on efficiency and productivity growth in the Korean Banking Industry, 1992-2002," Journal of Banking & Finance, Elsevier, vol. 30(8), pages 2371-2386, August.
  48. Keim, Donald B., 1983. "Size-related anomalies and stock return seasonality : Further empirical evidence," Journal of Financial Economics, Elsevier, vol. 12(1), pages 13-32, June.
  49. Lam, Pun-Lee & Chan, Yue-Cheong, 1998. "Privatizing water supply in Hong Kong," Utilities Policy, Elsevier, vol. 7(2), pages 95-105, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:ecofin:v:26:y:2013:i:c:p:119-144. See general 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: (Zhang, Lei)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.