Abstract
This research analyzes non-linear interdependencies between the Polish (WIG20) and the Spanish (IBEX 35) stock market returns with some other relevant international stock market returns, such as the German (DAX-30), the British (FTSE-100), the American (S&P 500) and the Chinese (SSE Composite) stock markets. In addition, this research focuses on the impact of the stage of the economy on these interdependencies, in concrete, on the influence of the 2008 Global Financial Crisis. To that end, we use a nonlinear autoregressive distributed lag (NARDL) approach in the sample period between January 1998 to December 2018. Our results show positive interdependencies between the Polish and the Spanish stock markets with the international reference stock markets analyzed in this research, as well as significant long-run relations between most of the stock markets. Furthermore, the Polish and the Spanish stock market returns may similarly react to positive and negative changes in international stock market returns, evidencing strong short-run asymmetry. In addition, both countries show great persistence in response to both positive and negative changes in stock market returns in the other mayor international markets. Finally, the NARDL model proposed in this research would show good explanatory power, mainly to changes in the international stock market returns, except for the Chinese market.
Highlights
The Financial Crisis of 2008 occupies a significant place in the field of financial and economic investigation, considering the effect it has on the level and direction of interdependencies between financial markets
This research focuses on the analysis of the connectedness between the Polish and the Spanish stock market returns with some relevant international stock market returns using an asymmetric nonlinear cointegration approach (NARDL) in order to capture both long-run and short-run asymmetries [12,13,14,47,48]
The empirical analysis conducted in this paper studies the level of non-linear interdependencies in a nonlinear autoregressive distributed lag (NARDL) framework between the polish WIG20 and the IBEX-35 from the Spanish stock exchange, and some relevant international stock markets, such as the DAX-30 from the German market, the American Standard and Poor’s 500 Index (S&P 500), the FTSE from the Great Britain market and the SSE Composite from China
Summary
The Financial Crisis of 2008 occupies a significant place in the field of financial and economic investigation, considering the effect it has on the level and direction of interdependencies between financial markets. For robustness, this paper investigates whether these interdependencies are stronger during periods of economic turmoil, taking into account that Spain and Poland are countries highly dependent on developments in international reference markets such as the German, the British, the American and the Chinese stock markets. The image was thereafter broadened by analysis of the impact of the crisis between developed and emerging markets [4,5]. More about this subject of study can be found in the publications of [6,7,8], among others
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