Stock Market Interdependence Research Articles

International Stock Market Interdependence: A South African Perspective

The time-varying interdependence between South Africa and both the UK and US is modeled using a latent variable approach. We find little interdependence prior to March 1995 when exchange controls and a dual exchange rate regime were in place. After the unification of the exchange rates and the removal of exchange controls on non-residents, the interdependence with the US increased considerably. Despite the fact that many large South African companies have their primary or secondary listing on the London Stock Exchange, there is little interdependence with the UK after March 1995. The increase in interdependence with the US is consistent with the increase in US purchases of South African equities after March 1995.

Economic determinants of emerging stock market interdependence

There is a wealth of literature on how integrated stock markets are, but very few studies attempts to determine why stock markets are integrated. However, it is arguably even more important to understand the driving forces behind stock market relationships than to know whether they exist. Such an understanding will provide a better grasp of the functioning of the global stock markets and allow investors and policy-makers to ask additional questions such as: Would an increase in bilateral trade between two countries, for example due to a new trade agreement, change the interdependence of their stock markets? If the growth rate of a particular emerging market falls due to the current global economic downturn, will its stock market drag along all the other stock markets or can it be known beforehand which stock markets are more likely to follow? This study empirically estimates cross-section and time-series models to determine the fundamental factors that influence the correlation and evolvement of the correlation between emerging stock markets.

Dynamic Modeling of Stock Market Interdependencies: An Empirical Investigation of Australia and the Asian NICs

This article examines the patterns of dynamic linkages among national stock prices of Australia and four Asian NIC stock markets namely, Taiwan, South Korea, Singapore and Hong Kong. By employing recently developed time-series techniques results seem to consistently suggest the relatively leading role of the Hong Kong market in driving fluctuations in the Australian and other NIC stock markets. In other words, given the generality of the techniques employed, Hong Kong showed up consistently as the initial receptor of exogenous shocks to the (long-term) equilibrium relationship whereas the Australian and the other NIC markets, particularly the Singaporean and Taiwanese markets had to bear most of the brunt of the burden of short-run adjustment to re-establish the long term equilibrium. Furthermore, given the dominance of the Hong Kong market in the region, the study also brings to light the substantial contribution of the Australian market in explaining the fluctuations to the other three markets, particularly Singapore and Taiwan. Finally, in comparison to all other NIC markets, Taiwan and Singapore appear as the most endogenous, with the former providing significant evidence of its short-term vulnerability to shocks from the more established market such as Australia.

Stock market interdependencies: Evidence from the asian NIEs

National asset markets have become more integrated in recent years. This paper investigates the interrelationship, if any, among the stock markets in four newly industrialized economies (NIEs) in Asia. The results indicate that a significant link exists between the stock markets of Hong Kong and Singapore and those of Japan and the United States. On the other hand, the markets with severe restrictions on cross-country investing, that is, Korea and Taiwan, are not responsive to innovations in foreign markets. Finally, the United States stock market influences, but is not influenced by, the four Asian markets.