Do Markets Cointegrate after Financial Crises? Evidence from G-20 Stock Markets

Mahfuzul Haque and Hannarong Shamsub
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Mahfuzul Haque: Department of Accounting, Finance, Insurance and Risk Management, Scott College of Business, Indiana State University, Terre Haute, IN 47809, USA
Hannarong Shamsub: Thailand Institute of Nuclear Technology (Public Organization), Ministry of Science and Technology, 16 Vibhavadi Rangsit Rd, Ladyao, Chatuchak, Bangkok 10900, Thailand

IJFS, 2015, vol. 3, issue 4, 1-30

Abstract: The results of the single-equation cointegration tests indicate that patterns of cointegration in the two main and four sub-periods are not homogeneous. Two key findings emerge from the study. First, fewer stock markets cointegrated with S&P 500 during the crisis period than they did during the pre-crisis. In other words, as the 2008 financial crisis deepened, S&P 500 and G-20 stock indices moved towards less cointegration. The decreasing number of cointegrating relationships implies that the U.S. stock markets and other G-20 markets have experienced different driving forces since the start of the U.S. crisis. Second, among those markets that are cointegrated with S&P 500, they happened to be deeply affected by S&P and the shocks emerging from it. The 2007–2009 financial crises can be considered a structural break in the long-run relationship and may have resulted from effective joint intervention/responses taken by members of G-20 nations.

Keywords: financial crises; euro crises; stock markets-developed and developing; cointegration; vector auto regression; granger causality and variance decomposition (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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