Evidence Of Co-movement Research Articles

Is the Metaverse Dead? Insights from Financial Bubble Analysis

This paper explores the economic trends and identifies speculative bubbles within the emerging metaverse, based on the specific example of Decentraland, which is represented by its underlying native token MANA.For comparability, we consider three further tokens: SAND, ETH, and BTC.The study shows price prediction and provides further insight into bubble behavior to provide a deeper insight into the real trend and situation of the metaverse. When comparing all considered tokens, evidence of comovement and positive as well as negative bubbles is identified. This paper makes use of proven modeling techniques, such as SARIMA, for price prediction and LPPLS for financial bubble identification, visualization, and time stamping.

Sentiment investor, exchange rates, geopolitical risk and developing stock market: evidence of co-movements in the time-frequency domain during RussiaUkraine war

PurposeThe aim of this paper is threefold: (1) to develop a new measure of investor sentiment rational (ISR) of developing countries by applying principal component analysis (PCA), (2) to investigate co-movements between the ten developing stock markets, the sentiment investor's, exchange rates and geopolitical risk (GPR) during Russian invasion of Ukraine in 2022, (3) to explore the key factors that might affect exchange market and capital market before and mainly during Russia–Ukraine war period.Design/methodology/approachThe wavelet approach and the multivariate wavelet coherence (MWC) are applied to detect the co-movements on daily data from August 2019 to December 2022. Value-at-risk (VaR) and conditional value-at-risk (CVaR) are used to assess the systemic risks of exchange rate market and stock market return in the developing market.FindingsResults of this study reveal (1) strong interdependence between GPR, investor sentiment rational (ISR), stock market index and exchange rate in short- and long-terms in most countries, as inferred from (WTC) analysis. (2) There is evidence of strong short-term co-movements between ISR and exchange rates, with ISR leading. (3) Multivariate coherency shows strong contributions of ISR and GPR index to stock market index and exchange rate returns. The findings signal the attractiveness of the Vietnamese dong, Malaysian ringgits and Tunisian dinar as a hedge for currency portfolios against GPR. The authors detect a positive connectedness in the short term between all pairs of the variables analyzed in most countries. (4) Both foreign exchange and equity markets are exposed to higher levels of systemic risk in the period of the Russian invasion of Ukraine.Originality/valueThis study provides information that supports investors, regulators and executive managers in developing countries. The impact of sentiment investor with GPR intensified the co-movements of stocks market and exchange market during 2021–2022, which overlaps with period of the Russian invasion of Ukraine.

Examining Cross-border Comovements of REITs Around the World

We examine the amount of the comovement among real estate investment trusts (REITs) around the world by estimating implied (risk-adjusted) comovements using a factor model approach. Our investigation uses a sample of individual REITs from 21 developed economies from 1990 to 2015 to examine whether cross-border comovements are observable. Our findings provide evidence of comovements after controlling for common risk factors and relevant firm characteristics. Furthermore, we show that the comovements increase over time and are more common for larger and more liquid REITs. The results indicate that country-level factors such as the local market conditions, financial development, domestic exchange rates, credit constraints, and governance significantly affect the amount of comovements.

Assessing Commonality in Liquidity with Principal Component Analysis: The Case of the Warsaw Stock Exchange

The studies concerning commonality in liquidity on emerging markets in Central and Eastern Europe are scarce and, in particular, they do not utilize the Principal Component Analysis (PCA) to identify latent factors in liquidity. Therefore, the main aim of this research is to assess commonality in liquidity on the Warsaw Stock Exchange (WSE) with the use of the PCA to extract common components of liquidity across a sample of stocks, and from a set of several liquidity proxies. The robustness tests within the whole sample and sub-periods are provided. The PCA results reveal that common latent factors in liquidity estimates exist on the Polish stock market, and three principal components are sufficient to substitute for the seven liquidity proxies utilized in this research. The regressions using these three principal components of liquidity proxies as latent factors in the market model of liquidity indicate no evidence of co-movements in liquidity on the WSE. The results are homogenous for all investigated periods so no reason has been found to reject the research hypothesis that commonality in liquidity does not exist on the Polish stock market. To the best of the authors’ knowledge, no similar research has been conducted for the WSE thus far.

Empirical Evidence of Co-Movement between the Canadian CDS, Stock Market And TSX 60 Volatility Index

Purpose- The prime objective of this study was to find the co-movement between the Canadian credit default swaps market, the Stock market and volatility index (TSX 60 Index) Design/ Methodology- To achieve this purpose, daily data containing 2870 observations starting from the 1st of January 2009 to the 30th of December 2019 were analyzed. This study employed the wavelet approach to present results in short-term, medium-term, long-term, and very long time. Findings- The findings of this study showed a negative correlation between the CDS market, stock market, and the TSX 60 index in the short-term as well as in the long-term term, while in medium-term and very long-term period correlation is strongly positive. The wavelet co-movement results in the short-term and long-term were negative, while this relationship in the medium-term and very long-term period was strongly positive. Practical Implications- This research provides simultaneous valuable information for investment decisions in the short, medium, and long term time horizons, as well as for the policymakers in the Canadian credit default swaps market, stock market, and the volatility index (TSX 60 Index).

Intra-market commonality in liquidity: new evidence from the Polish stock exchange

Research background: Empirical market microstructure research has recently shifted its focus from the examination of liquidity of individual securities towards analyses of the common determinants and components of liquidity. The identification of commonality in liquidity emerged as a new and fast growing strand of the literature on liquidity. However, the results around the world are ambiguous and rather depend on a specific stock market.
 Purpose of the article: The aim of this study is to explore intra-market commonality in liquidity on the Warsaw Stock Exchange (WSE) by using daily proxies of six liquidity estimates: percentage relative spread, percentage realized spread, percentage price impact, percentage order ratio, modified turnover, and modified version of the Amihud measure. The sample covers a period from January 2005 to December 2016. The database contains the group of eighty-six WSE-listed companies.
 Methods: The research hypothesis that there is commonality in liquidity on the Polish stock market is tested. The OLS with the HAC covariance matrix estimation and the GARCH-type models are employed to infer the patterns of liquidity co-movements on the WSE. Moreover, because the sample period is quite long, the stability of the empirical results by time period is examined. Seven 6-year time windows are utilized in the study.
 Findings & Value added: The regression results reveal weak evidence of co-movements in liquidity on the WSE, regardless of the choice of the liquidity proxy. Furthermore, the robustness tests based on the time rolling-window approach do not unambiguously support the research hypothesis that there is commonality in liquidity on the Polish stock market. To the best of the author?s knowledge, the empirical findings presented here are novel and have not been reported in the literature thus far.

Saudi's Growth and Financial Spillovers to Other GCC Countries: An Empirical Analysis

This paper examines real and financial linkages between Saudi Arabia and other GCC countries. Growth spillovers from Saudi Arabia to Bahrain are found to be sizeable and statistically significant, but those to other GCC countries are not found to be significant. Equity market movements in Saudi Arabia are found to have significant implications for other GCC countries, while there is no evidence of co-movements in bonds markets. These findings suggest some degree of interdependence among GCC countries.

Saudi's Growth and Financial Spillovers to Other GCC Countries: An Empirical Analysis

This paper examines real and financial linkages between Saudi Arabia and other GCC countries. Growth spillovers from Saudi Arabia to Bahrain are found to be sizeable and statistically significant, but those to other GCC countries are not found to be significant. Equity market movements in Saudi Arabia are found to have significant implications for other GCC countries, while there is no evidence of co-movements in bonds markets. These findings suggest some degree of interdependence among GCC countries.

Credit Default Swaps: Does the Traded Volume Influence Research Interest?

The 21st century witnessed an extraordinary boom in the CDS market. The increased popularity of CDS instruments as investment and hedging vehicles has seen a parallel development in the CDS research literature. This paper exploits the results of a search on title textual analysis to explore interactions between CDS aggregate trading volumes and the number of CDS research articles. We find significant evidence of co-movement over the 2001-2010 period which is illustrated by means of a cointegration and informational leadership analysis. We additionally document the effects of the 2010 Dodd Frank Act reforms in the level of trading activity. While there is a decreasing trend in volumes traded over the second sample period, the level of research interest remains significant. We contend that the academic literature aims to contribute to the regulation policy debate involving position limits in the CDS market.

Exchange Rates and Macro News in Emerging Markets

This paper uses a VAR-GARCH(1,1) model to analyse mean and volatility spillovers between macro news (in the form of newspaper headlines) and the exchange rates vis-a-vis both the US dollar and the euro of the currencies of a group of emerging countries including the Czech Republic, Hungary, Indonesia, Korea, Mexico, Poland, South Africa, Thailand and Turkey over the period 02/1/2003-23/9/2014. The results suggest limited dynamic linkages between the first moments compared to the second moments, causality-in-variance being found in a number of cases. The conditional correlations also provide evidence of co-movement. Finally, the recent global financial crisis appears to have had a significant impact.

Financial stability, wealth effects and optimal macroeconomic policy combination in the United Kingdom: A new-Keynesian dynamic stochastic general equilibrium framework

This study derives an optimal macroeconomic policy combination for financial sector stability in the United Kingdom by employing a New Keynesian Dynamic Stochastic General Equilibrium (NK-DSGE) framework. The empirical results obtained show that disciplined fiscal and accommodative monetary policies stance is optimal for financial sector stability. Furthermore, fiscal indiscipline countered by contractionary monetary stance adversely affects financial sector stability. Financial markets, e.g. stocks and Gilts show a short-term asymmetric response to macroeconomic policy interaction and to each other. The asymmetry is a reflection of portfolio adjustment. However in the long-run, the responses to suggested optimal policy combination had homogenous effects and there was evidence of co-movement in the stock and Gilt markets.

Do financial stress and policy uncertainty have an impact on the energy and metals markets? A quantile regression approach

This paper examines the impact of financial stress and policy uncertainty on the price dynamics of energy (crude oil, heating oil and gas) and metal (gold, silver, copper, platinum and palladium) commodity futures in the USA. Using a quantile regression approach for the period 1994–2015, our empirical results show that, after controlling for the effect of general stock market returns and interest rates, there is neither co-movement nor Granger causality between commodity futures prices and financial uncertainty as measured by the VIX or between commodity prices and policy uncertainty. However, we find evidence that financial stress had Granger causality effects in intermediate and upper commodity return quantiles, but no evidence of co-movement. We also show that the impact of the global financial crisis on commodity returns differed across quantiles, only having a negative impact in upper quantiles. Our results indicate that general stock market uncertainty conditions are not so crucial in determining commodity futures prices.

Illiquidity in the Stock and FX Markets: An Investigation of Their Cross-Market Dynamics

In this paper, I investigate the illiquidity channel linking the stock and FX markets.The evidence of co-movement and cross-market spillovers is supportive of important dynamics in illiquidity, especially during the recent crisis. To clarify the nature of these dynamics, I consider the role of two important players on both markets, institutional investors and dealers. Overall, correlated institutional trading contributes to liquidity across markets. Furthermore, as funding availability reduces in times of crisis, dealers' funding constraints affect the observed dynamics. Finally, both correlated institutional trading and dealers' funding constraints are potential triggers of systemic illiquidity spirals.

Empirical Evidence of Co-Movements between China and Global Stock Markets

This paper investigates the dynamic correlations between Chinese stock return and global markets at both market and sectoral levels. Statistics suggest that stock-return correlations across markets are time-varying and display structural breaks. The evidence indicates that the stock returns of financial sector exhibit the highest correlation across countries among 10 sectors. Low correlations present in Health Cares, Telecommunications, and Utilities sectors. The correlations tied closely with geographic location – the correlation with Hong Kong is highest followed by South Koran, Japan, Europe and US markets. The time-series stock-return correlations are positively correlated with the conditional variance and variance premiums.

Viewing Economy as a Network: An Exploration Through Input-Output Model

National Innovation System is a departure from viewing entrepreneurship as individual-agent based phenomenon. Viewing economy as a network system gives a perspective to make interventions for innovation at systemic level. In this paper, by identifying the network properties of the Indian economy, using input-output data sets, we provide evidence for co-movement of economic growth, employment and betweenness of the sectors in input-output network of Indian economy. We argue that by structurally repositioning the sectors of economy (by generating new ties or strengthening existing but weak ties), it is possible to create opportunities for innovation, which will have multiplier effects through chains of economy. By examining the structure of the networked Indian economic system, we identify integration of services particularly that of transportation services to be the primary challenge for growth and innovation.

Empirical Evidence of Comovements between China and Global Stock Markets

Empirical Evidence of Comovements between China and Global Stock Markets

Common trends and common cycles among interest rates of the G7-countries

Both, from a macroeconomic modeling perspective, as well as for a policy point of view, there has recently been a renewed interest in the cyclical and long-run comovement of interest rates. In this paper we re-investigate the long- and short-run comovements in the G7-countries by conducting tests for cointegration, common serial correlation and codependence with nominal and real interest rates, using quarterly data from 1975 to 2010. Overall, we find only little evidence of comovements. Common trends are occasionally observed, but the majority of interest rates are not cointegrated. Although some evidence for codependence of higher order is found in the pre-Euro area sample, common cycles appear to exist only in rare cases. We argue that some earlier, more positive findings are difficult to reconcile due to differing assumptions about the underlying stochastic properties of interest rates. We conclude that they cannot be generalized for all interest rates, time periods, and reasonable alternative estimation procedures.

U.S. Regional Housing Bubbles, Their Co-Movements and Spillovers

This paper provides the first empirical evidence for co-movement and spillover effects of regional housing bubbles. In our two-stage identification strategy, we first decompose the observed housing price into a fundamental and a bubble component. We then analyze the interdependence among these regional bubble series using spatial econometric methods. The empirical results indicate that a regional bubble first affects the nearby regions via geographical proximity. Spillover effects reinforce the influence on nearby regions. Similar economic and financial conditions help spread the bubble across regions. Simulation results reveal that the diffusion process will be amplified by a bubble’s intrinsic dynamics as well as by market price expectations. We conclude that a regional housing bubble is of more than regional interest because it may infect numerous other regions and also cause nationwide problems through wealth and multiplier effects once it bursts.

Common Trends and Common Cycles among Interest Rates of the G7-Countries

In this paper we re-investigate the comovements of interest rates in the G7-countries. We propose a structured modus operandi to analyze the time series characteristics of interest rates and to test for common features. We conduct cointegration, serial correlation common feature and codependence tests with nominal and real interest rates using quarterly data from 1975 to 2007. Overall we only find little evidence of comovements. Common trends are occasionally observed, but the majority of interest rates are not cointegrated. Although some evidence for codependence of higher order is found among European countries, common cycles appear to exist only in rare cases and cannot be generalized for all interest rates.

Common stocastic trends among Caribbean currencies: Evidence from Guyana, Jamaica, and Trinidad and Tobago

This study of stochastic trends in small open economies documents the nonnormal distribution, serial correlation, and nonstationarity of Caribbean exchange rates for the last two decades of the twentieth century. In addition, this study documents clear evidence of co-movement among Caribbean exchange rates for this period especially after the economic reforms of the early 1990s. These findings have important implications for policy makers, managers, investors, and scholars interested in the Caribbean region.