Determinants of Time Varying Co-Movements Among International Stock Markets During Crisis and Non-Crisis Periods

24 Pages Posted: 14 Mar 2016

See all articles by Mobarek Asma

Mobarek Asma

Stockholm Business School

Yaz Gulnur Muradoglu

Queen Mary University of London; City University London - Sir John Cass Business School

Sabur Mollah

Sheffield University Management School, University of Sheffield; Swansea Management School, Swansea University; Hull University Business School; Hull University Business School

Ai Jun Hou

Stockholm University

Date Written: March 12, 2016

Abstract

In this paper, we use the DCC MIDAS approach to assess the validity of the wake-up call hypothesis for developed and emerging markets during the global financial crisis (GFC). We use this approach to decompose the total correlations into short- (daily) and long-run (quarterly) correlations for the period from 1999 to 2011. We then examine the transmission mechanisms by regressing the quarterly economic, financial, and behavioral variables on the quarterly DCC-MIDAS correlations. We find that country specific factors are crisis contingent transmission mechanisms for the co-movements of emerging country pairs and mixed pairs of advanced and emerging countries during the global financial crisis. However, we do not observe wake-up calls in the transmission of the crisis among advanced country pairs. The classification of the transmission mechanisms for crisis and non-crisis periods with the different country pairs has important implications for crisis management as well as for portfolio investment strategies. Thus, our findings contribute to the discussion on the role and effectiveness of the international financial architecture.

Keywords: Stock market Co-movement, Advanced and Emerging markets, Crisis, Transmission mechanisms.

JEL Classification: G01, G11, G12, G15

Suggested Citation

Asma, Mobarek and Muradoglu, Yaz Gulnur and Mollah, Sabur and Hou, Ai Jun, Determinants of Time Varying Co-Movements Among International Stock Markets During Crisis and Non-Crisis Periods (March 12, 2016). Journal of Financial Stability, 2016. Available at SSRN: https://ssrn.com/abstract=2746882

Mobarek Asma (Contact Author)

Stockholm Business School ( email )

Roslagsvägen 1010
Stockholm, SE-106 91
Sweden

Yaz Gulnur Muradoglu

Queen Mary University of London ( email )

Francis Bancroft Building
Mile End Road
London, E1 4NS
United Kingdom

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
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+44 20 7040 8853 (Fax)

Sabur Mollah

Sheffield University Management School, University of Sheffield ( email )

Conduit Road
Sheffield, Sheffield S10 1FL
United Kingdom

Swansea Management School, Swansea University ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Great Britain HU6 7RX
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Hull HU6 7RX
United Kingdom

Ai Jun Hou

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

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