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Dynamic linkages between stock markets: the effects of crises and globalization

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  • Małgorzata Doman
  • Ryszard Doman

Abstract

This paper investigates changes in the dynamics of linkages between selected national stock markets during the period 1995–2009. The analysis focuses on the possible effects of globalization and differences between crisis and non-crisis periods. We model the dynamics of dependencies between the series of daily returns on selected stock indices over different time periods, and compare strength of the linkages. Our tools are dynamic copula models and a formal sequential testing procedure based on the model confidence set methodology. We consider two types of dependencies: regular dependence measured by means of the conditional Spearman’s rho, and dependencies in extremes quantified by the conditional tail dependence coefficients. The main result consists of a collection of rankings created for the considered subperiods, which show how the mean level of strength of the dependencies have been changing in time. The rankings obtained for Spearman’s rho and tail dependencies differ, which allows us to distinguish between the results of crises and the effect of globalization. Copyright The Author(s) 2013

Suggested Citation

  • Małgorzata Doman & Ryszard Doman, 2013. "Dynamic linkages between stock markets: the effects of crises and globalization," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 12(2), pages 87-112, August.
    • Handle: RePEc:spr:portec:v:12:y:2013:i:2:p:87-112
    DOI: 10.1007/s10258-013-0091-1
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    Cited by:

    1. Paulo Ferreira, 2017. "Portuguese and Brazilian stock market integration: a non-linear and detrended approach," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 16(1), pages 49-63, April.
    2. Rubi Ahmad & Oyebola Fatima Etudaiye-Muhtar & Bolaji Tunde Matemilola & Amin Noordin Bany-Ariffin, 2016. "Financial market development, global financial crisis and economic growth: evidence from developing nations," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 15(3), pages 199-214, December.
    3. Chen, Wei & Qu, Shuai & Jiang, Manrui & Jiang, Cheng, 2021. "The construction of multilayer stock network model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 565(C).
    4. Anita Radman Peša & Elżbieta Wrońska-Bukalska & Jurica Bosna, 2017. "ARDL panel estimation of stock market indices and macroeconomic environment of CEE and SEE countries in the last decade of transition," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 16(3), pages 205-221, December.

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    More about this item

    Keywords

    Globalization; Crisis; Stock index; Co-movement; Spearman’s rho; Tail dependence; Copula; Model confidence set; G15; G01; C58; C32;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G01 - Financial Economics - - General - - - Financial Crises
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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