International connectedness of equity markets and the crude oil market: the case of Iran, Pakistan, and Turkey

Harald Schmidbauer and Angi Roesch

No 6079, International Conference on Energy, Regional Integration and Socio-economic Development from EcoMod

Abstract: The evolution of connectedness between international equity and commodity markets across time can be measured building on forecast error variance decomposition in a vector autoregression (VAR) framework. This approach permits the assessment of directional spillovers across markets on a day-to-day basis, which can be cast in a daily spillover matrix. Broadening the scope of this concept, we study the markets' constitution and interaction in terms of information propagation values and entropies adopting a Markov chain perspective. Our findings can be summarized as follows. There is a trend towards higher connectedness among Western equity markets, starting in the 1990s. In the case of Russia and Turkey, a discernible trend has begun around 2005; however, there is a sign of substantial connectedness neither in the case of Iran nor Pakistan. Although the overall impact level of Iran and Pakistan is very low, we can identify short periods of time when KSE or TEPIX had a potentially high impact on international markets. Crude oil markets showed almost no connection with equity markets before 2007, which has been changing since then. Comparing Turkey on the one hand and Iran and Pakistan on the other, one conclusion is that the latter economies are more or less secluded and using their international potential yet.

Keywords: We apply this methodology to daily quotations of five stock indices; namely DJIA (New York; USA); DAX (Frankfurt; Germany); XU100 (Istanbul; Turkey); TEPIX (Tehran; Iran); and KSE (Karachi; Pakistan); and WTI crude oil.; Economic and financial effects of climate change; Regional integration (search for similar items in EconPapers)
Date: 2013-09-05
References: Add references at CitEc
Citations:

Downloads: (external link)
http://ecomod.net/system/files/
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://ecomod.net/system/files/ [301 Moved Permanently]--> https://ecomod.net/system/files/)

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:005741:6079

Access Statistics for this paper

More papers in International Conference on Energy, Regional Integration and Socio-economic Development from EcoMod Contact information at EDIRC.
Bibliographic data for series maintained by Theresa Leary ().