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Are the stock indices of FTSE Malaysia, China and USA causally linked together ?

Author

Listed:
  • Nasir, Nur Alissa
  • Masih, Mansur

Abstract

In this paper, we test the causal linkages among the FTSE Malaysia, FTSE China and FTSE USA stock market indices. The investigation is conducted using the standard time series econometric techniques using monthly data. The issue is approached from two perspectives: (i) whether these markets move together (ii) and the dynamic linkages of the lead-lag relationships. Our analysis finds one significant cointegrating relationship among the selected markets, with the FTSE Malaysia being the follower and the FTSE China being being the most leading one. These findings tend to suggest that the FTSE Stock Indices of these three markets have a strong long-run equilibrium relationship mostly driven by fundamental elements of the economy. In addition, the strong leading role of the FTSE China Index implies that the China market may have a strong influence over the other regional markets. These findings have strong policy implications.

Suggested Citation

  • Nasir, Nur Alissa & Masih, Mansur, 2018. "Are the stock indices of FTSE Malaysia, China and USA causally linked together ?," MPRA Paper 98782, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:98782
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    References listed on IDEAS

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    1. Bachman, Daniel & Choi, Jongmoo Jay & Jeon, Bang Nan & Kopecky, Kenneth J., 1996. "Common factors in international stock prices: Evidence from a cointegration study," International Review of Financial Analysis, Elsevier, vol. 5(1), pages 39-53.
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    4. Maysami, Ramin Cooper & Koh, Tiong Sim, 2000. "A vector error correction model of the Singapore stock market," International Review of Economics & Finance, Elsevier, vol. 9(1), pages 79-96, February.
    5. Jian Yang & James Kolari & Insik Min, 2003. "Stock market integration and financial crises: the case of Asia," Applied Financial Economics, Taylor & Francis Journals, vol. 13(7), pages 477-486.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    FTSE stock indices; causal linkages; VECM; VDC;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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