Level Of Market Integration Research Articles

Time-Varying Integration of REITs with Stocks: A Kalman Filter Approach

This paper tests the level of market integration between Equity Real Estate Investment Trusts (REITs) and the stock market, using the Korajczyk (1996) market integration index and the Kalman filter methodology. The Kalman-filter technique is employed to capture the dynamic degree of integration between REITs and the stock market. The results show that REITs were highly integrated with the stock market throughout most of the sample period from 1984:1 to 2018:12. Nonetheless, the time varying market integration index displays a number of changes, which coincide with fluctuations in the legislation governing REITs and certain market and economic events. As a robustness check, we also compare the time varying market integration index of REITs with that displayed by Utilities. The results show that Utilities displayed a similar time varying market integration pattern to that of REITs and so indicates that the changes in market integration is not simply a REIT factor but a high yield sector phenomenon. Unlike REITs, from April 2011 Utilities became segmented from the stock market and remained so up to the end of the sample period, even though the static integration index suggested that utility stocks were integrated with the stock market over the whole sample period. Last, results show that the Kalman filter approach is more useful than static models when studying the integration process and so casts strong doubt on the validity of time invariant models to measure market integration.

Measuring market integration and estimating policy impacts on the Swiss electricity market

We investigate market integration in Central Western European electricity markets with a focus on Switzerland. We propose a structural microeconometric approach to measuring the degree of market integration taking advantage of unilateral demand and supply shocks such as the generation from volatile renewable resources, the unavailability of generation units, and national holidays. These exogenous events affect electricity prices in Switzerland and allow estimating the level of market integration by disentangling their effects in congested and non-congested situations. Exploiting information on congested and non-congested situations in parametric instrumental-variable estimation permits simulating hypothetical non-congested Swiss electricity prices in historically congested situations. Our approach allows considering the non-linear nature of level-shifts of congestion and disentangling it from the structurally different interplay of demand and supply in respective situations. Using data on hourly electricity prices and its determinants regarding Switzerland and neighboring countries from 2015 and 2016, we find that an expansion of interconnector capacity at the German-Austrian/Swiss border could decrease Swiss electricity prices substantially. In a more attenuated way, the same holds true for the French/Swiss and the Italian/Swiss border. For Switzerland as a whole, prices in congested situations are about 17% higher than hypothetical, non-congested prices.

Breastfeeding Duration and the Social Learning of Infant Feeding Knowledge in Two Maya Communities.

Variation in the durations of exclusive breastfeeding (exBF) and any breastfeeding (anyBF) is associated with socioecological factors. This plasticity in breastfeeding behavior appears adaptive, but the mechanisms involved are unclear. With this concept in mind, we investigated whether durations of exBF and anyBF in a rural Maya population covary with markers of a form of socioecological change-market integration-and whether individual factors (individual learning, physiological plasticity) and/or learning from others in the community (social learning, norm adherence) mediate these changes. Using data from 419 mother-child pairs from two Guatemalan Maya villages, we fit a bivariate linear mixed model. The model compared exBF and anyBF among children from households of varying degrees of market integration whose mothers follow what we inferred to be local infant-feeding norms. It controlled for other factors expected to affect breastfeeding durations. We found evidence that exBF is associated with whether mothers follow their population's infant feeding norms, but no evidence that exBF is associated with the household's level of market integration. Conversely, anyBF is significantly associated with the household's market integration, but not with the villages' inferred norms. Because deviations from exBF norms are likely to result in infant mortality and reduced fitness, we hypothesize that the incentive to conform is relatively strong. Relatively greater individual plasticity in anyBF allows mother-child pairs to tailor it to socioecological conditions. Deviations from anyBF norms may be tolerated because they may provide later-life health/fitness payoffs, while posing few risks to infant survival.

International Real Estate Review

The market integration of real estate investment trusts (REITs) in the US and four Asian markets as well as between their local stock and REIT markets are investigated in this paper. Using a number of modern econometric techniques on three integration indictors/proxies: time-varying conditional correlations, dynamic risk connectivity (variance-covariance) and cause and effect dependency of linear /nonlinear spillover and connectedness, we find that the five REIT markets show less integration than their corresponding stock markets. Moreover, the modelling of the portfolio risk spillover and connectedness (with covariance) shows a higher average level of market integration for the Asian REIT group. The REIT markets have experienced some significant shifts in their net total and net-pairwise directional risk connectivity. Additionally, investors and policymakers are reminded that any modelling of the cause and effect dependency of the REIT markets should be implemented with linear regression equations and a nonlinear value at risk system in risk spillover and connectedness (with covariance). Finally, significant contagious effects are identified across the REIT markets and stock and REIT portfolios during the global financial crisis and China stock market crash.

The future relevance of electricity balancing markets in Europe - A 2030 case study

In the context of an increasing share of variable renewable electricity in the European generation mix the question arises to what extent electricity balancing markets will gain importance in the future. On the one hand, forecast errors of variable renewable electricity drive demand for balancing. On the other hand, transmission system operators across Europe progressively coordinate their actions in order to increase efficiency of balancing markets and thus mitigate the rise of imbalances. Against the background of uncertain future framework conditions, i.e. market design and the level of market integration, this paper aims to assess the relevance of electricity balancing markets across Europe for a set of scenarios in a 2030 context. We apply an established large-scale electricity market model of Europe to derive quantitative insights on market shares and revenues from day-ahead, intra-day and balancing markets. The results show that although the amount of balancing energy is expected to increase in the mid-term, the monetary volume of electricity balancing markets will still lay in the range of a few percent of day-ahead market volumes. The results also confirm that the relevance of this market segment is considerably impacted by the development of framework conditions, which also have distinct impacts on different countries and technologies.

Commodities risk premia and regional integration in gas-exporting countries

This study examines the fundamental driving forces of stock market integration with particular emphasis on major Gas-Exporting Countries (hereafter known as GECs), namely the United Arab Emirates, Qatar, Venezuela, Saudi Arabia, Russia, and Kuwait, over the period from June 2003 to November 2017. The novelty of our study stems from the fact that we examine a dynamic process of international, regional and national stock markets integration using a set of local, regional, global and commodities as driving forces of integration. Particularly, we measure market integration using gas price as a common source of risk in addition to the world, regional and domestic sources of risk based on a conditional version of the International Capital Asset Pricing Model (ICAPM). Our study also differs from past ones in that we investigate the integration of stock markets into the international market as well as in the GECs countries. Our results show that the level of market integration of the major gas-exporting countries varies widely over time and depends on the interest rate spread, the level of market openness and market volatility. It also seems to be still significantly segmented from both the global and GECs markets. Gas risk represents a small part of the global risk in all the countries considered in this study.

How connected are the U.S. regional natural gas markets in the post-deregulation era? Evidence from time-varying connectedness analysis

The level of market integration is a critical indicator of resource allocation efficiency. In this paper, we evaluate the dynamic spatial integration in the U.S. natural gas market since deregulation and the relative importance of each location in the overall price discovery process. Using data from seven natural gas spot markets in the U.S, as well as one Canadian spot market located on the border between U.S. and Canada, we find that the U.S. regional natural gas market is on average well-integrated in both the short- and long-runs. The connectedness price index we constructed ranges between 55% and 85% during the sample period (1994–2016). Though the connectedness of the market has generally improved, a marked decline has occurred over the past few years, coincident with the shale gas boom. This decline may be attributed to pipeline capacity constraints in an increasingly oversupplied market and the relatively small number of market participants voluntarily reporting transaction activities to price indexes. We find that the role of each regional market in the overall price discovery process has undergone several shifts during our sample period, depending on the specific market conditions at both the national and regional level. Of the eight locations, Henry Hub and Oneok appear to be the two most active markets, both transmitting and receiving a substantial amount of information throughout most of the sample period.

Assessing the contagion effect on herding behaviour under segmented and integrated stock markets circumstances in the USA, China, and ASEAN-5

This paper investigates the contagion effect of herding behaviour in the US, China, and ASEAN-5 stock markets by considering the level of market integration. We employed individual stocks and market returns on daily basis data during the global financial crisis (GFC) and the recent tranquil periods. The sample observed consists of stocks having higher liquidity and larger market capitalisation in each of the stock markets. We applied the cross-sectional returns dispersion approach and ordinary least squares to achieve the purpose by involving static correlation. During the GFC period, the empirical result provides evidence on the presence of herding transmission from the dominant stock market to other integrated markets bilaterally. Specifically, herding behaviour in a domestic market was affected by herding activity in integrated foreign markets. By contrast, herding behaviour in a domestic market was not affected by herding in segmented foreign markets. Comparing to the recent tranquil period of 2017-2018, the contagion effect appears on the market only during the crisis period. Therefore, market participants should be more conservative in anticipating the emergence of this phenomenon for integrated markets under market crisis circumstances.

Evaluating the effect of intra-industry trade on the bilateral trade productivity for petroleum products of Iran

The rapid growth of energy consumption and the unequal distribution of energy resources have increased the concern for sustainable development in the face of deteriorating energy security. However, institutional arrangements associated with the energy market and market integration can improve the distribution of energy products and boost bilateral trade productivity in energy products. Furthermore, intra-industry trade (IIT) can increase the level of market integration among trading partners through expanding vertical relationships among them. Thus, the aim of this study is to evaluate the effect of IIT on bilateral trade productivity. Hence, this study tries to identify the determinants of bilateral trade flows of crude oil and petroleum products among Iran and its major partners using the Poisson pseudo-maximum-likelihood (PPML) method during 1997–2016. Then, the bilateral trade productivity of the selected products will be calculated using the Malmquist index. Finally, the effect of IIT on the bilateral trade productivity among Iran and its partners will be evaluated using panel data method. Based on the results, the gross domestic product (GDP) per capita, the difference of oil reserves, the access to sea, and the IIT have positive effects on the bilateral trade flows, while the effects of transportation costs and economic sanctions are negative. Also, the impact of IIT on the bilateral trade productivity is positive.

Global price discovery in the Australian dollar market and its determinants

With Australia's growing importance in the global economy, the Australian dollar (AUD) has started to play a significant role in the global Foreign Exchange (FX) market. Using intraday trading data over the period of January 1999 to December 2013, we examine the determinants of price discovery in the AUD markets at two different time horizons. We find that the short-run determinants of price discovery include macroeconomic news, order flows and market state variables (i.e., return, volatility, trading volume and bid/ask spread). After controlling for the cross-region information flow and dynamic self-dependence, we find that more favorable market states and more unexpected order flows on macroeconomic news announcement days make a significant contribution to price discovery in the AUD market. Furthermore, we found that a higher level of market integration and consolidation contributes to price discovery process in the long-run.

EVALUATION OF THE PROFITABILITY AND PERFORMANCE OF YOUTH PARTICIPATION IN CASHEW NUT (ANACARDIUM OCCIDENTALE) MARKETING IN ANKPA LOCAL GOVERNMENT AREA OF KOGI STATE, NIGERIA

This study assessed youth participation in cashew nut marketing in Ankpa Local Government Area of Kogi State, Nigeria. It specifically described the socioeconomic characteristics of the youths, examined the profitability of youth involvement in cashew nut marketing, assessed the efficiency and performance of youth in cashew nut marketing, and determined the level of market integration in cashew nut marketing. A three staged random sampling method was used to select 120 youth involved in cashew nut marketing for the study. Relevant primary data obtained through structured questionnaire were analysed using descriptive statistics, gross margin model, marketing efficiency, and Pearson price correlation. Findings of the study showed a mean age and marketing experience of 37 years and 10 years respectively. Gross margin obtained was N 445, 563.90 per annum, N14, 811.11 per bag and N185.11per kg with a high efficiency level of 654%. The level of integration (0.415) between Awo and Enjema markets was significant 5%. Youth are encouraged to consider cashew nut marketing as an option to reduce unemployment and improve their welfare.

Econometric Analysis of Asymmetric Price Transmission Using Threshold Cointegration Approach: A Case Study of Morocco’s Apple Markets

The level of market integration between deficit and surplus markets is a key determinant of price stability and food security. Thus, market integration can be regarded as a way of assessing efficiency of agricultural markets. The current study intends to investigate the domestic market integration and explore the potential presence of asymmetric price adjustments between spatially separated markets. The paper employs threshold cointegration approach using monthly data of wholesale apples prices over the period from September 1993 to June 2017 in five major wholesale markets in Morocco. Study findings suggest that wholesale apples markets are significantly cointegrated, implying the presence of the long-run equilibrium relationships between the examined markets pairs. Considering the evidence as a whole, for five out of eight market pairings, the results reveal that the nature of price transmission exhibits significant asymmetric adjustments. Nonetheless, the empirical analysis does not always support the research hypothesis, stipulating that deficit market prices adjust more swiftly to price increases than to price decreases in surplus market because of the market power of intermediaries in the food marketing chain. Based on these results, the domestic market integration shows some signs of weakness, which may affect the progress of the sector. In this respect, further efforts should be made to enhance market performance so as to ensure an even balance between the production and marketing segment.

Systemic Risks Spillovers and Interdependence among Stock Markets: International Evidence with Covar‐Copulas

AbstractEmpirical studies have provided ample evidence on the potential benefits of international diversification with portfolios that consist of both domestic and foreign assets. This coupled with sudden and periodic crashes in global and developed equity markets have stimulated the interest of investors to diversify across markets that have the potential to provide decorrelation with global markets during turbulent periods. At the same time, international diversification may intensify cross‐border listing of stocks with its antecedent implication of shocks transmission. The above have engendered renewed interest among researchers to explore the dependence levels and spillover effects of shocks among emerging and developed equity markets. This paper examines tail dependence structure and (extreme) systemic risks spillover effects among international equity markets using advanced econometric techniques that underpin the modelling of asset returns. We find evidence of low positive significant dependencies between all African markets and their developed counterparts, except for Egypt. Although no evidence of spillover effects to the markets in Africa was found, both unidirectional and bi‐directional causality between some African and developed equity markets is found, albeit with differences. We are unable to ascribe the dynamics in the causality structure to level of market integration. It is inferred that the degree of individual local markets interdependence with developed counterparts may reflect the relative size, liquidity and degree of foreign investors' participation.

How Connected are the U.S. Regional Natural Gas Markets in the Post-Deregulation Era? Evidence from Time-Varying Connectedness Analysis

The level of market integration is a critical indicator of resource allocation efficiency. In this paper, we evaluate the dynamic spatial integration in the U.S. natural gas market since deregulation and the relative importance of each location in the overall price discovery process. Using data from seven natural gas spot markets in the U.S, as well as one Canadian spot market located on the border between U.S. and Canada, we find that the U.S. regional natural gas market is on average well-integrated in both the short- and long-run. The connectedness index we constructed ranges between 55% and 85% during the sample period (1994-2016). Though the connectedness of the market has generally improved, a marked decline has occurred over the past few years, coincident with the shale gas boom. This decline may be attributed to pipeline capacity constraints in an increasingly oversupplied market and the relatively small number of market participants voluntarily reporting transaction activities to price indexes. We find that the role of each regional market in the overall price discovery process has undergone several shifts during our sample period, depending on the specific market conditions at both the national and regional level. Of the eight locations, Henry Hub and Oklahoma appear to be the two most active markets, both transmitting and receiving most information throughout most of the sample period.

Dynamic Portfolio Strategies in the European Corporate Bond Market

In this paper, we propose a dynamic portfolio strategy for European corporate bonds based on a two-factor pricing model. We introduce a strategy in which we forecast both future factors as well as bonds' future exposure to these factor. Using a unique dataset that is representative for the universe of actively quoted European corporate bonds, we find that the strategy based on forecasted factors outperforms a number of benchmark strategies, whereas the strategy based on forecasted exposures does not. There is, however, ample time variation in the performance, related to market uncertainty and the level of market integration. At the individual bond level, we find signifcant outperformance over the benchmark.

Money, Food, and Daily Life Objects Are Similarly Shared in the Dictator Game. A Study among Poles and Tsimane'.

The dictator game (DG) is one of the most popular methods for measuring sharing behaviors. However, the matter of goods used in the game has rarely been examined and discussed. We conducted a study in which all participants played standard version of DG in one of the three versions – “money,” “food,” or “daily life objects” sharing. Further, we wanted to expand the generalizability of our findings by investigating whether patterns in sharing various goods are independent of culture and the level of market integration. Thus, the study was conducted among people who function daily under the conditions of low market integration (109 Tsimane’ – forager-horticulturists from Bolivian Amazon) and in a society highly integrated with the market-based economy (85 Polish people). We observed that among both Polish and Tsimane’ people the participants were equally likely to share money, food and small, daily life objects with an unknown partner, which implies that generosity might not be related with the type of possessed resources. However, regardless of the kind of goods given, Tsimane’ people were less eager to share with anonymous others than Polish people. We present several implications of our findings for studies on generosity and altruism.

Divergence of sentiment and stock market trading

This paper introduces the concept of divergence of sentiment to the behavioral finance literature. We measure the distance between people with positive and negative sentiment on a daily basis for 20 countries by using data from status updates on Facebook. The prediction is that a higher divergence of sentiment leads to more diverging views on prospects and risks, and thus to more diverging views on the value of a stock. In line with this prediction, divergence of sentiment is positively related to trading volume. We further predict and find a positive relation between divergence of sentiment and stock price volatility. The observed relations are stronger when individual investors are more likely to trade. We compare the effect of our country-specific measures to a global measure of divergence of sentiment. We find that the separate effects of country-specific and global divergence measures depend on a country's level of market integration.

Cross-correlations between volatility, volatility persistence and stock market integration: the case of emergent stock markets

In this paper, we investigate the dynamics of the two pairs of relationship, respectively volatility/market integration and volatility persistence/market integration, in the case of 20 emerging stock markets during the period 1999–2013. Employing the rolling windows approach we find that on most markets the persistent positive trend in volatility and volatility persistence is associated with the same trend in market integration. We use the detrending moving-average cross-correlation coefficients and we find positive cross-correlation that appears particularly in the long term and can only partly be attributed to the global financial crisis. The cross-section analysis shows that the markets which are more integrated display stronger volatility and volatility persistence, especially after 2005, when the level of market integration is higher. Our findings have several important implications for international portfolio management and security valuation.

Spatial Price Linkages of Brown Cowpea (Vigna unguiculata) in Nigerian National Markets

The study was undertaken to examine the existence and the level of market integration among selected cowpea markets in Nigeria. Co-integration and Granger causality tests were used to measure market integration and leading markets between producing and consuming regions. Result of the co-integration test using Johansen likelihood procedure to determine the number of co-integrating relations indicates that the wholesale prices of brown cowpea in the selected markets in Nigeria are co-integrated. The pairwise Granger causality test shows that Umuahia–Monday, Umuahia–Giwa, Giwa–Bodija and Bodija–Giwa market pairs rejected the null hypothesis of no causaality. Moreover, there is a bidirectional Granger causality between Giwa and Bodija markets at 5 per cent significant level. Thus, Giwa and Bodija are the markets occupying the dominant position in the Nigerian brown cowpea price formation and transmission. Few of the markets are spatially linked by trade, so there is low market integration between the regional brown cowpea markets in Nigeria.

Divergent Paths of State-Society Relations in European and Trans-Tasman Economic Integration

Observers of transnational market integration in Europe and elsewhere tend to assume a direct relationship between economic complementarity — high levels of economic transactions between countries — and depth of integration. Economic complementarity provides greater opportunities for private actors to capture the benefits of integration and is therefore assumed to be a source of social ‘demand’ required for integration. This article challenges this conventional wisdom. Australia and New Zealand have achieved a level of market integration that is comparable to that in Europe. Yet, the two countries lack economic complementarity, suggesting an alternative mechanism to the one outlined above. Rather than social groups ‘demanding’ integration vis-à-vis policy-makers’ reluctance to ‘supply’ it, in the trans-Tasman case, policy-makers led integration as the source of both ‘supply’ and ‘demand’. This observation suggests the need to question, rather than assume, the empirical sources of supply of, and demand for, efforts to coordinate economic markets transnationally.