Macro-economic determinant and interdependence of the stock markets: evidence from emerging economies

  • Asim Rafiq
  • Shahbib Hassan

Resumen

The purpose of the study is threefold. First, is to examine the long-term interdependence between China and the ten emerging economies, including Pakistan, Malaysia, Philippine, Indonesia, India, Hungary, Mexico, Russia, South Africa and Brazil using Johansen co-integration. Second, is to measure the time-varying interdependence between China and the other emerging economies using DDC GARCH model. Third, is to examine the impact of macroeconomic determinants on stock markets conditional correlations using panel regression. Monthly data from 2010 to 2016 is used. Results indicate that there is long-term interdependence between China and the other ten emerging economies. Furthermore, the results of DDC GARCH model support that China has a higher positive significant correlation with Pakistan, India, China, Indonesia, Malaysia, Philippine, Hungary, Mexico, Russia and South Africa. Finally, the results of the panel regression show that macroeconomic determinants have no significant effect on the equity market correlations between China and its companion emerging economies. It this, therefore, we can conclude that there is long run interdependence between the Chinese and the other emerging economies. Furthermore, this interdependence is also dynamic over the time. However, there is no significant impact of the macroeconomic determinants on the stock market interdependence between Chinese and the ten emerging economies.

Publicado
2019-01-10