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Long-run relationships between international stock prices: further evidence from fractional cointegration tests

Author

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  • Marcel Aloy

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, DEFI - Université de la Méditerranée - Aix-Marseille 2)

  • Boutahar Mohamed

    (IML - Institut de mathématiques de Luminy - Université de la Méditerranée - Aix-Marseille 2 - CNRS - Centre National de la Recherche Scientifique)

  • Karine Gente

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, DEFI - Université de la Méditerranée - Aix-Marseille 2)

  • Anne Peguin-Feissolle

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

The recent empirical literature supports the view that most of the international stock prices are not pairwise cointegrated. However, by using fractional cointegration techniques, this paper shows that France, Germany, Hong Kong, and Japan stock prices indices are pairwise fractionally cointegrated with US stock prices. Equilibrium errors are mean reverting with half-life lying between 2 and 12 days. It is worthwhile noting that emerging markets like Brazil and Argentina are not pairwise cointegrated with the US stock market. These new results have important implications for asset pricing and international portfolio strategy.

Suggested Citation

  • Marcel Aloy & Boutahar Mohamed & Karine Gente & Anne Peguin-Feissolle, 2013. "Long-run relationships between international stock prices: further evidence from fractional cointegration tests," Post-Print hal-00743767, HAL.
    • Handle: RePEc:hal:journl:hal-00743767
    DOI: 10.1080/00036846.2011.566207
    Note: View the original document on HAL open archive server: https://hal.science/hal-00743767v1
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