International Stock Market Leadership and its Determinants

42 Pages Posted: 13 Oct 2015

See all articles by Charlie X. Cai

Charlie X. Cai

University of Liverpool Management School

Mobarek Asma

Stockholm Business School

Qi Zhang

Independent

Date Written: July 17, 2015

Abstract

We study time-varying price leadership between international stock markets using a Markov switching causality model. We demonstrate variations in the causality pattern over time, with the US being the dominant country in causing other markets. We examine the factors which determine a country’s role in the causal relationship. For country-specific factors, we show that trades openness increases price leadership. We also find that the lead-lag relationship between the stock markets is weaker during crisis periods, confirming the “wake-up call” hypothesis, with markets and investors focusing substantially more on idiosyncratic, country-specific characteristics during the crisis.

Keywords: Causality, price leadership, financial crisis, causality factors

JEL Classification: G12, G10

Suggested Citation

Cai, Charlie Xiaowu and Asma, Mobarek and Zhang, Qi, International Stock Market Leadership and its Determinants (July 17, 2015). Available at SSRN: https://ssrn.com/abstract=2672594 or http://dx.doi.org/10.2139/ssrn.2672594

Charlie Xiaowu Cai (Contact Author)

University of Liverpool Management School ( email )

University of Liverpool
Liverpool, L69 7ZA
United Kingdom

Mobarek Asma

Stockholm Business School ( email )

Roslagsvägen 1010
Stockholm, SE-106 91
Sweden

Qi Zhang

Independent

No Address Available

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