Title: Stock market interdependence and its determinants: comparative analysis of developed and emerging markets

Authors: Dora Gatti

Addresses: IHEC, Carthage Présidence, Tunis, Tunisia

Abstract: The growing evolution of globalisation and the several crises, which disturbed international stock markets, raised important questions about international stock market interdependence: (a) How does the degree of international stock market interdependence vary over time? (b) What are the factors that explain stock market interdependence? Considering stock market heterogeneity, we extend the analysis to different groups of developed and emerging markets of different regions. Using daily returns for 24 national equity markets from 1996 to 2005, we estimate annual Geweke feedback measures. The estimated measures reveal strong intermarket responses that are mostly completed within 24 hours. These results suggest a high degree of both market integration and market efficiency. There is also evidence of an explanatory power of several of our 12 factors, although the results differ with the group of markets examined. Although there is a tendency for intensified stock market co-movements, there are still possibilities for international diversification.

Keywords: stock market interdependence; market integration; market efficiency; international financial markets; emerging markets; determinants; Geweke measures; international diversification.

DOI: 10.1504/IJFERM.2013.055851

International Journal of Financial Engineering and Risk Management, 2013 Vol.1 No.2, pp.140 - 169

Published online: 08 Aug 2013 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article