Gustaf Psarakis-Sporrong
Ph.D. Student, Stockholm University, Sweden.
Asma Mobarek
Associate Professor, Stockholm University, Sweden.International Perspective of Indoor and Outdoor
Co- Movements of Stock Market:
An Extensive Investigation
The primary objective of the study is to investigate whether and
how the international stock markets are interdependent. Up-to-date,
there are plenty of segmented research on market integration, contagion
and co-movements including a particular crisis with a particular region.
Eventually those research are suppose to be incomplete in a sense that
none of those research answer fully the subsequent questions; whether
there is constant or time varying co-movements around the world, how
we can measure the pattern and level of co-movement over time
including different global events? The proposed study attempts to
investigate the complete answers of those questions with International
market longitudinal data including major global shocks. Firstly, by
using a sample period of 29 years including 11 crisis it gives room for
an extensive comparison of co- movement before, during and after
global shocks and also makes it possible to investigate what importance
the origin of the shock has on co- movement. Secondly, our study will
not only use country indices but also several industrial indices to
investigate if and how they co- move within and across countries.
Finally, we will investigate the time- varying aspect of correlation of the
above mentioned indices applying non- linear modeling in the
nonlinear financial world that gives room for identification of
asymmetries in co- movement. Our study will employ the Asymmetric,
A-DCC-GARCH, model allowing for the revision of correlation
estimates based on immediate past conditional variances and the
asymmetric effects. We will extend the study by adapting a VAR
framework to investigate both bilateral and multi- country linkages.
The proposed study will contribute to the modeling of International
Capital Asset pricing Model (ICAPM). Practical implication of the study
is that being the complete picture of the co-movements in international
stock markets will provide cross border investors and overseas fund
managers a roadmap for their investment decision and policymakers
with valuable references to investigate whether different global shocks
have remarkable change in the pattern of co-movements.