INFORMATION PROPAGATION BETWEEN EQUITY MARKETS: THE CASE OF BRIC, TURKEY, THE USA, AND GERMANY

Harald Schmidbauer, Angi Roesch and Erhan Uluceviz

No 5458, EcoMod2013 from EcoMod

Abstract: The overall degree of international equity market connectedness has gradually increased over the past two decades. Reflecting the shift in global economic power, it has been recently suggested to pay more attention to the BRICT (Brazil, Russia, India, China, and Turkey) countries. Building on, and methodologically adding to, an established approach to market connectedness, this study makes an effort to assess the connectedness of these markets, together with the US and German equity markets. Our methodological contributions consist of the analysis of information propagation, based on Markov chains and information entropy. We find that the BRICT countries' degree of equity market connectedness has increased substantially since the early 2000s, with different timing which can be related to major international events. Furthermore, in spite of increased Chinese connectedness, a hypothetical shock to the Chinese equity market still has a very low impact on risk levels in other markets, in contrast to shocks in other markets considered here. Nevertheless, a shock to the Chinese equity market creates an information disequilibrium harder to digest by the international market system than a shock to the German or US markets. This analysis permits conclusions concerning the information policy prevalent in markets.

Keywords: BRICT (Brazil; Russia; India; China); USA; Germany; Macroeconometric modeling; Developing countries (search for similar items in EconPapers)
Date: 2013-06-21
New Economics Papers: this item is included in nep-cis
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://ecomod.net/system/files/report_information_ ... _v2013-05-13_v02.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ekd:004912:5458

Access Statistics for this paper

More papers in EcoMod2013 from EcoMod Contact information at EDIRC.
Bibliographic data for series maintained by Theresa Leary ().