Abstract
Researchers pay more and more attention on the price comovement-effect among international stock markets. This paper deals with the transmission mechanism of price shocks among three stock markets of China, Russia and India, with a sample of weekly returns. The results showed that the price fluctuation of each market has an influence on other markets, although the price behavior is significantly independent. The impact of external price innovations will last 5 or 6 weeks usually and disappear after about 8 weeks. The pattern of transmission-mechanism for the price shocks is very different from each other. Besides, a further study revealed that the influence of external shocks on the domestic stock price increased significantly among the three markets after the 2008 international financial crisis.
Highlights
As three important emerging economies in the world, China, Russia and India are geographical proximity and closely interconnected in terms of political, economic, social, cultural, military, scientific and technological spheres
The other is that current studies usually tested whether there is a comovement effect in the stock markets among different countries or regions, while they paid little attention on the transmission mechanism of stock price shock
This paper investigates the transmission effect of stock price shock with a sample of weekly closing price indices ranging from January 1998 to December 2012, including the Shanghai composite index of China, the RTS index of Russia and the SENSEX30 index of India
Summary
As three important emerging economies in the world, China, Russia and India are geographical proximity and closely interconnected in terms of political, economic, social, cultural, military, scientific and technological spheres. These countries have a huge impact on global and regional development and stability. In October 2003, a global economic report of the Goldman Sachs predicted that over the 50 years the world economy will change dramatically and the six largest economies will be China, US, India, Japan, Brazil and Russia in 20501. After the 2008 international financial crisis, the three countries further strengthened the economic and political cooperation under the BRICs-country mechanism. The remainder of this paper is organized as follows: section 2 is a review of the related theory and literatures, section 3 discusses the methodology, section 4 reports the empirical study and section 5 concludes the paper shortly
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