Linkages between the center and periphery stock prices: Evidence from the vector ARFIMA model

Hasan Olgun and Zeynel Ozdemir ()

Economic Modelling, 2008, vol. 25, issue 3, 512-519

Abstract: This paper provides evidence on the effects of US equity markets on those of selected emerging markets, using the vector fractionally integrated autoregressive moving-average (VARFIMA) model. This model has not so far been employed in examining the interdependence among the equity markets of the world countries. The paper employs four-variate VARFIMA model which allows us to conduct the empirical analysis without transforming the raw data and captures the fractal dynamics. The findings show that while the stock price series of some markets are non-stationary, but mean-reverting, those of some others are non-stationary and non-mean reverting. The more significant finding is that the S&P500 has permanent effects on the stock prices of the emerging markets included in the sample.

Date: 2008
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