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Asymmetric and nonlinear inter-relations of US stock indices

Author

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  • Dimitrios Vortelinos
  • Konstantinos Gkillas (Gillas)
  • Costas Syriopoulos
  • Argyro Svingou

Abstract

Purpose - The purpose of this paper is to examine the inter-relations among the US stock indices. Design/methodology/approach - Data of nine US stock indices spanning a period of sixteen years (2000-2015) are employed for this purpose. Asymmetries are examined via an error correction model. Non-linear inter-relations are researched via Breitung’s nonlinear cointegration, a M-G nonlinear causality model, shocks to the forecast error variance, a shock spillover index and an asymmetric VAR-GARCH (VAR-ABEKK) approach. Findings - The inter-relations are signi?cant. The results are robust across all types of inter-relations. They are highest in the Lehman Brothers sub-period. Higher stability after the EU debt crisis, enhances independence and growth for the US stock indices. Originality/value - To the best of the knowledge, this is the first study to examine the inter-relations of US stock indices. Most studies on inter-relations concentrate on the portfolio analysis to reveal diversification benefits among various asset markets internationally. Hence this study contributes to this literature on the inter-relations of a specific asset market (stock), and in a specific nation (USA). The evident inter-relations support the notion of diversification benefits in the US stock markets.

Suggested Citation

  • Dimitrios Vortelinos & Konstantinos Gkillas (Gillas) & Costas Syriopoulos & Argyro Svingou, 2018. "Asymmetric and nonlinear inter-relations of US stock indices," International Journal of Managerial Finance, Emerald Group Publishing, vol. 14(1), pages 78-129, February.
  • Handle: RePEc:eme:ijmfpp:ijmf-02-2017-0018
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    Keywords

    Non-linear; Stock markets; Crises; Inter-relations; G01; G11;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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