IDEAS home Printed from https://ideas.repec.org/a/eme/ijmfpp/v5y2009i2p222-242.html
   My bibliography  Save this article

World and regional factors in stock market returns

Author

Listed:
  • Suluck Pattarathammas
  • Anya Khanthavit

Abstract

Purpose - This paper aims to test the hypothesis that the national stock market returns are driven by a world factor, regional factors and idiosyncratic factors, and to measure the importance of each factor. Design/methodology/approach - The state-space model is applied to describe the sample returns and estimate a world factor, regional factors and idiosyncratic factors by Kalman filtering. Weekly and daily returns calculated from MSCI country indexes from January 1988 to December 2004 of 11 national stock markets in four regions, i.e. North America (the USA and Canada), South America (Brazil, Mexico and Chile), Europe (the UK, Germany and France), and Asia (Japan, Hong Kong, and Singapore) are used. Findings - The results support the hypothesis that national market returns are driven by a world factor, regional factors and idiosyncratic factors. National markets do not always respond mainly to the world factor; regional factors and idiosyncratic factors play important roles as well. They also respond to world news at a slower rate than regional news. Research limitations/implications - This paper does not identify the source or origins of news directly but the factors are assumed as random variables and are estimated under certain strict assumptions. Originality/value - This paper applies Kalman filtering to estimate a world factor and regional factors and test the importance of each factor directly, an extension of previous studies that mostly showed strong independence among markets.

Suggested Citation

  • Suluck Pattarathammas & Anya Khanthavit, 2009. "World and regional factors in stock market returns," International Journal of Managerial Finance, Emerald Group Publishing, vol. 5(2), pages 222-242, April.
  • Handle: RePEc:eme:ijmfpp:v:5:y:2009:i:2:p:222-242
    as

    Download full text from publisher

    File URL: http://www.emeraldinsight.com/10.1108/17439130910947912?utm_campaign=RePEc&WT.mc_id=RePEc
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Erk Hacihasanoglu & F. N. Can Simga-Mugan & Ugur Soytas, 2012. "Do Global Risk Perceptions Play a Role in Emerging Market Equity Return Volatilities?," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 48(4), pages 67-78, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:ijmfpp:v:5:y:2009:i:2:p:222-242. 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: (Virginia Chapman). General contact details of provider: http://www.emeraldinsight.com .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.