The Financial Crisis and Co-Movement of Global Stock Markets—A Case of Six Major Economies

Yonghong Jiang, Mengmeng Yu and Shabir Mohsin Hashmi
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Yonghong Jiang: Institute of Finance, Jinan University, Guangzhou 510632, China
Mengmeng Yu: Finance Department, Jinan University, Guangzhou 510632, China
Shabir Mohsin Hashmi: International School, Jinan University, Guangzhou 510632, China

Sustainability, 2017, vol. 9, issue 2, 1-18

Abstract: This paper investigates the impact of recent financial crisis on six major stock markets during the three periods. To measure the impact of the crisis on different stock markets, we have applied a vector auto-regression (VAR) model and conducted Granger causality tests. The data used in this study, consists of time series of daily stock market indices at closing time, in terms of local currency units of the world’s six major stock markets which were affected during the financial crisis, while the sample period was divided into several sub-periods. The main objectives of the research was to discover the degree of interdependence of the six stock markets and trace out the Granger causality relationships and dynamic responses of one market to in another in innovation, and to make a comparison on the degree of the co-movements in three periods, namely, the pre-crisis period, crisis period, and post-crisis periods. The results suggest that the financial crisis has reinforced the interdependence relationship of global stock markets. However, general co-movements of global stock markets persist even after the crisis and still remained stronger in some economies.

Keywords: stock market co-movement; VAR model; Granger causality test; impulse response; financial crisis (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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