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Political crises and the stock market integration of emerging markets

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  • Frijns, Bart
  • Tourani-Rad, Alireza
  • Indriawan, Ivan

Abstract

This paper investigates the role of political crises in explaining the degree of stock market integration in emerging markets over the period 1991–2006. Using the International Crisis Behavior database, which contains detailed information on political crises around the world, and employing data on more than 15,500 firms, we assess whether political crises affect stock market integration in 19 emerging markets in South and East Asia, Latin America, and Central and Eastern Europe. We conclude that crises with certain characteristics generally reduce the level of stock market integration in these regions. In particular, the beginning of a political crisis, its severity, the involvement of the US in the conflict, and the number of parties involved in a crisis all have impacts on the level of stock market integration in these markets.

Suggested Citation

  • Frijns, Bart & Tourani-Rad, Alireza & Indriawan, Ivan, 2012. "Political crises and the stock market integration of emerging markets," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 644-653.
  • Handle: RePEc:eee:jbfina:v:36:y:2012:i:3:p:644-653
    DOI: 10.1016/j.jbankfin.2011.05.007
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    References listed on IDEAS

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    Cited by:

    1. Rudkin, Simon & Wong, Sen Min, 2015. "South East Asian Financial Linkages and the Changing Role of China: Insights from a Global VAR," MPRA Paper 65001, University Library of Munich, Germany.
    2. repec:eee:reveco:v:51:y:2017:i:c:p:314-327 is not listed on IDEAS
    3. Arouri, Mohamed El Hedi & Nguyen, Duc Khuong & Pukthuanthong, Kuntara, 2012. "An international CAPM for partially integrated markets: Theory and empirical evidence," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2473-2493.
    4. Kim, Suk-Joong & Salem, Leith & Wu, Eliza, 2015. "The role of macroeconomic news in sovereign CDS markets: Domestic and spillover news effects from the U.S., the Eurozone and China," Journal of Financial Stability, Elsevier, vol. 18(C), pages 208-224.
    5. Eduard Baum??hl & ??tefan Ly??csa, 2014. "How smooth is the stock market integration of CEE-3?," William Davidson Institute Working Papers Series wp1079, William Davidson Institute at the University of Michigan.
    6. Niţoi, Mihai & Pochea, Maria Miruna, 2016. "Testing financial markets convergence in Central and Eastern Europe: A non-linear single factor model," Economic Systems, Elsevier, vol. 40(2), pages 323-334.
    7. Sriananthakumar, Sivagowry & Narayan, Seema, 2015. "Are prolonged conflict and tension deterrents for stock market integration? The case of Sri Lanka," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 504-520.

    More about this item

    Keywords

    Stock market integration; International crises; Emerging markets;

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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