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A comparative analysis of the propagation of stock market fluctuations in alternative models of dynamic causal linkages

Listed author(s):
  • Abul Masih
  • Rumi Masih

The patterns of dynamic linkages are examined among national stock prices of four Asian Newly Industrializing Countries stock markets - Taiwan, South Korea, Singapore and Hong Kong - in models incorporating the established markets of Japan, USA, UK and Germany. Recent time-series techniques are employed, including unit root testing, multivariate cointegration, vector error-correction modelling (VECM), forecast error variance decomposition (VDC) and impulse response functions (IRFs). The results consistently appear to suggest the relatively leading role of all established markets in driving fluctuations in the NIC stock markets. In other words, all established markets and Hong Kong, consistently were the initial receptors of exogenous shocks to the (long-term) equilibrium relationships and the other NIC markets, particularly the Singaporean and Taiwanese markets had to bear most of the burden of short-run adjustment to re-establish the long-term equilibrium relationship. In comparison to all other NIC markets, Taiwan and Singapore appear as the most endogenous, with Taiwan providing evidence of its short-term vulnerability to shocks from the established markets.

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Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 7 (1997)
Issue (Month): 1 ()
Pages: 59-74

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Handle: RePEc:taf:apfiec:v:7:y:1997:i:1:p:59-74
DOI: 10.1080/096031097333853
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