Global factors and the transmission between United States and emerging stock markets

Muhammad Abubakr Naeem, Saqib Farid, Fiza Qureshi and Farhad Taghizadeh‐Hesary

International Journal of Finance & Economics, 2023, vol. 28, issue 4, 3488-3510

Abstract: In this study, we examine the influence of global factors in driving connectedness among Unite States and emerging stock markets. For this purpose, we employ widely recognized approaches of and Barunik and Krehlik to estimate connectedness among the underlying markets in time‐frequency domains. Also, we use the tests proposed by Péguin‐Feissolle and Teräsvirta to examine the impact of global factors on the transmission relationship between United States and emerging stock markets utilizing the non‐linear causality tests. The findings validate the influential role of global factors in channeling overall total spillovers between United States and emerging stock markets. However, the results for individual emerging markets show some degree of heterogeneous impact of global factors in driving connectedness across different emerging stock markets. Our robustness results also confirm the main findings. Important implications of findings are discussed for portfolio managers and policymakers.

Date: 2023
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