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What drives dynamic comovements of stock markets in the Pacific Basin region?: A quantile regression approach

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  • Lee, Hyunchul
  • Cho, Seung Mo

Abstract

In this paper, we show that pairwise similarities of a set of macroeconomic variables among major countries in the Pacific Basin region can account for the stock market comovements in the region. We first suggest a simple theoretical argument why pairwise similarities of macroeconomic variables can derive stock market comovements. We then apply the conditional nonlinear quantile regression on the pairwise realized stock return correlations for the stock markets in the Pacific Basin region from 1990 to 2012 to empirically justify the argument. As a result, we find evidence that smaller pairwise differences or larger pairwise similarities of a set of macroeconomic variables significantly drive the stock market comovements in the region in a nonlinear way.

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  • Lee, Hyunchul & Cho, Seung Mo, 2017. "What drives dynamic comovements of stock markets in the Pacific Basin region?: A quantile regression approach," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 314-327.
    • Handle: RePEc:eee:reveco:v:51:y:2017:i:c:p:314-327
    DOI: 10.1016/j.iref.2017.05.005
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    More about this item

    Keywords

    Stock market comovements; Macroeconomic performances; Realized correlations; Nonlinearity; Conditional quantile regression;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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