Cointegration of International Stock Market Indices

Ray Chou, Victor Ng and Lynn Pi

No 1994/094, IMF Working Papers from International Monetary Fund

Abstract: In this paper, we derive evidence on the integration of international stock markets from the cointegration properties of international stock market prices. Using the multivariate cointegration test of Johansen, we find that the set of six country stock price indices, including that of the United States, Canada, the United Kingdom, France, Germany, and Japan are cointegrated. The results suggest that there are long-run equilibrium relationships among the stock market prices. Subsample and subgroup analyses also indicate that the cointegration relationships have become stronger over time. This is consistent with greater stock market integration amid the increasing liberalization and globalization of capital markets.

Keywords: WP; stock market; price; price series; integrating vector; market integration; test statistics; short-run price dynamics; price variable; augmented term; integration relationship; Stock markets; Asset prices; International capital markets; Securities markets; North America (search for similar items in EconPapers)
Pages: 16
Date: 1994-08-01
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Citations: View citations in EconPapers (40)

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