INTEGRATION IN BRIC STOCK MARKETS: AN EMPIRICAL ANALYSIS

2020 ◽  
Author(s):  
Paula Heliodoro ◽  
◽  
Rui Dias ◽  
Paulo Alexandre ◽  
Cristina Vasco ◽  
...  
Keyword(s):  
Financial Markets ◽  
Stock Markets ◽  
Sovereign Debt ◽  
Financial Integration ◽  
Statistical Significance ◽  
Sustainable Growth ◽  
Portfolio Diversification ◽  
Impulse Response Functions ◽  
Institutional Reforms ◽  
Global Pandemic

This paper aims to analyse financial integration in the markets of Brazil, China, India and Russia (BRIC’s), from July 2015 to June 2020, being the sample split in pre and during the global pandemic (Covid-19). In order to carry out this analysis, different approaches were undertaken to analyse two issues, namely, whether: (i) the global pandemic has accentuated the interdependencies in the BRIC financial markets? If so, how it has influenced the efficiency of portfolio diversification. The results suggest very significant levels of integration, in the Covid period these evidences diminish the chances of portfolio diversification in the long term. In turn, the analysis of the relationship between markets, in the short term, through the impulse response functions, in a period of global pandemic, shows positive/negative movements, with statistical significance, with persistence exceeding one week. In addition, there was no immediate adjustment in prices between markets, due to the high levels of shocks identified. Regarding the implementation of efficient portfolio diversification strategies, we consider that a good option for investors would be to avoid investments in stock markets. In this sense, one suggestion could be to invest in derivatives, gold and sovereign debt markets, with the purpose of diversifying portfolios and mitigating the risk arising from the global pandemic. The authors consider that the results achieved are of interest to investors seeking opportunities in these exchanges, as well as to policy makers to undertake institutional reforms in order to increase the efficiency of stock markets and promote the sustainable growth of financial markets.

scholarly journals FINANCIAL CONTAGION BETWEEN THE US AND EMERGING MARKETS: COVID-19 PANDEMIC CASE

2020 ◽  
Author(s):  
Paula Heliodoro ◽  
◽  
Rui Dias ◽  
Paulo Alexandre ◽  
◽  
...  
Keyword(s):  
Financial Markets ◽  
Latin American ◽  
Stock Markets ◽  
Null Hypothesis ◽  
Sustainable Growth ◽  
Financial Contagion ◽  
Policy Makers ◽  
Global Pandemic ◽  
The Us ◽  
Bds Test

To realise how crises are disseminated is relevant for policy makers and regulators in order to take appropriate measures to prevent or contain the propagation of crises. This study aims to analysis the financial contagion in the six main markets of Latin America (Argentina, Brazil, Chile, Colombia, Mexico and Peru) and the USA, in the period 2015-2020. Different approaches have been undertaken to carry out this analysis in order to consider the following research question, namely whether: (i) the global pandemic covid19 has accentuated the contagion between Latin American financial markets and the US? The results of the autocorrelation tests are totally coincident with those obtained by the BDS test. The rejection of the null hypothesis, i.i.d., can be explained, among other factors, by the existence of autocorrelation or by the existence of heteroscedasticity in the stock market index series, in which case the rejection of the null hypothesis is explained by non-linear dependence on data, with the exception of the Argentine market. However, significant levels of contagion were expected to occur between these regional markets and the US as a result of the global pandemic (Covid-19), which did not happen. These results may indicate the implementation of efficient diversification strategies. The authors consider that the results achieved are relevance for investors who seek opportunities in these stock markets, as well as for policy makers to carry out institutional reforms in order to increase the efficiency of stock markets and promote the sustainable growth of financial markets.

scholarly journals HOW LONG IS THE MEMORY OF THE REGION LAC STOCK MARKET?

2020 ◽  
Vol 3 (2) ◽  
pp. 131-137
Author(s):  
Paulo Alexandre ◽  
Rui Dias ◽  
Paula Heliodoro
Keyword(s):  
Financial Markets ◽  
Weak Form ◽  
Sustainable Growth ◽  
World Health ◽  
Stock Exchanges ◽  
Institutional Reforms ◽  
Policy Makers ◽  
Global Pandemic ◽  
Daily Data ◽  
Health Organization

Coronavirus Covid-19 is a type of outbreak that first appeared in December 2019 in the city of Wuhan, Hubei Province, China. It was declared a pandemic by the World Health Organization (WHO) on March 12, 2020. This trial aims to test the hypothesis of an efficient market, in its weak form, in the context of the global pandemic, in the financial markets of Argentina, Brazil, Chile, Colombia, Peru, Mexico. The sample comprises daily data from July 2015 to June 2020 and is divided into two sub-periods pre and during Covid-19. The purpose of this analysis was to answer whether: i) the global pandemic (Covid-19) increased synchronization in the financial markets under analysis? ii) if so, could the persistence of profitability delimit the hypothesis of portfolio diversification? The results of the Gregory-Hansen test show very significant levels of integration in the periods before and during the Covid pandemic. In addition, we found that most of the breaks in structure are in March 2020. The results of the DFA exponents show that during the pre-Covid period, the Peruvian market shows persistence, suggesting signs of inefficiency (long memories), while the Argentinean market shows anti persistence, and the remaining markets show an equilibrium trend. In addition, we found that during the VOCID period the Chilean and Colombia markets show very significant signs of inefficiency, with moderate signs of in (efficiency) the Argentinean, Brazilian and Peruvian markets. In addition, we verified that the Mexican market shows signs of anti-persistence. In conclusion, the emerging markets of Latin America show, for the most part, long persistent and significant memories during the Covid pandemic outbreak, that is, they show signs of in (efficiency). The authors consider that the results achieved are of interest to investors seeking opportunities in these stock exchanges, as well as to policy makers to carry out institutional reforms in order to increase the efficiency of stock markets and promote the sustainable growth of financial markets.

Institutional Reforms, Financial Development and Sovereign Debt: Britain 1690–1790

2006 ◽  
Vol 66 (4) ◽  
pp. 906-935 ◽  
Author(s):  
Nathan Sussman ◽  
Yishay Yafeh
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Financial Development ◽  
Sovereign Debt ◽  
Glorious Revolution ◽  
Institutional Reforms ◽  
Short Run ◽  
Per Capita ◽  
The Glorious Revolution ◽  
The Cost

We revisit the evidence on the relations between institutions, the cost of government debt, and financial development in Britain (1690–1790) and find that interest rates remained high and volatile for four decades after the Glorious Revolution, partly due to wars and instability; British interest rates co-moved with those in Holland; Debt per capita remained lower in Britain than in Holland until around 1780; and Britain did not borrow at lower rates than European countries with more limited protection of property rights. We conclude that, in the short run, institutional reforms are not rewarded by financial markets.

FINANCIAL MARKET INTEGRATION OF ASEAN-5 WITH CHINA: AN ECONOPHYSICS APPROACH

2020 ◽  
Author(s):  
Rui Dias ◽  
◽  
Paula Heliodoro ◽  
Paulo Alexandre ◽  
Cristina Vasco ◽  
...  
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Market Integration ◽  
Open Space ◽  
Financial Integration ◽  
Weak Form ◽  
International Markets ◽  
Portfolio Diversification ◽  
Stock Market Crash ◽  
Regional Markets

The main objective of this research is to estimate whether portfolio diversification is feasible in the financial markets of Indonesia, Malaysia, Philippines, Singapore and Thailand (ASEAN-5), and the market of China, in the context of the stock market crash in China in 2015. The purpose is to answer two questions, namely whether: (i) has the stock market crash in China increased financial integration in the ASEAN-5 financial markets and China? (ii) If the presence of long memories may put in question the diversification of portfolios? The results suggest that these markets are segmented, except for Malaysia/Singapore, bi-directional, and China/Filipinas, pre-crash. However, when analysing the stock market crash period, the results indicate 16 integrated market pairs with structure breakdown (in 30 possible). When compared with the previous sub-period it was found that during the stock market crash the level of financial integration increased significantly (533%). In the post-crash period, there were right integrated market pairs with broken structure. When compared to the crash period, the level of integration decreased in 50%. In addition, we observed that during the stock market crash these Asian markets did not have long memories, except for the Malaysian market, which reveals some predictability, that is, the increase in integration does not lead to persistence in these Asian markets. In conclusion, the ASEAN-5 markets and China mostly exhibit strong signs of efficiency in their weak form. The authors consider that the implementation of portfolio diversification strategies is beneficial for investors. These conclusions also open space for market regulators to take action to ensure better information between these regional markets and international markets.

scholarly journals RISK DIVERSIFICATION IN ASEAN-5 FINANCIAL MARKETS: AN EMPIRICAL ANALYSIS IN THE CONTEXT OF THE GLOBAL PANDEMIC (COVID-19)

2020 ◽  
Author(s):  
Rita Silva ◽  
◽  
Rui Dias ◽  
Paula Heliodoro ◽  
Paulo Alexandre ◽  
...  
Keyword(s):  
Financial Markets ◽  
Global Economy ◽  
Open Space ◽  
Financial Integration ◽  
Correlation Coefficients ◽  
World Health ◽  
Stock Market Index ◽  
Risk Diversification ◽  
Global Pandemic ◽  
Regional Markets

The World Health Organization (WHO) has designated the new coronavirus infection as a global pandemic, based on the risk of contagion, and the number of confirmed cases in more than 195 countries. COVID-19 has an intense impact on the global economy, resulting from uncertainty and pessimism, with adverse effects on financial markets. Due to these events, this essay aims to estimate if the portfolio’s diversification is feasible in the financial markets of Indonesia, Malaysia, Philippines, Singapore, and Thailand (ASEAN-5), in the context of the global pandemic (Covid-19), regarding the period of July 1, 2019, to July 22, 2020. To achieve such an analysis, is intended to provide answers for two questions, namely: i) the global pandemic (Covid-19) has accentuated financial integration between the ASEAN-5 markets? ii) If so, can the persistence of returns affect the risk diversification of portfolios? The results obtained suggest that those regional markets present accentuated levels of integration. However, the Singapore's stock market index does not show any level of integration, indicating that the implementation of portfolio’s diversification strategies can be considered; however, the same can no longer be evident for the other ASEAN-5 markets. Additionally, we verified that the ASEAN-5 markets indicate persistence in returns, that is, the presence of accentuated long memories, except for the Singapore market (SGX). These findings show that prices do not fully reflect the information available and that changes in prices are not independent and identically distributed. This situation is found for investors, since some returns can be expected, creating opportunities for arbitrage and abnormal earnings. Corroborating the trendless cross-correlation coefficients (𝜆𝐷𝐶𝐶𝐴), proven evidence coefficients, mostly, suggest the existence of risk transmission between markets. In conclusion, the authors seek that the implementation of an efficient diversification strategy for portfolios requires agreement with the controversial application. These conclusions also open space for the regulators of these regional markets to take measures to ensure better information between these markets and international markets.

scholarly journals The Comovement of Exchange Rates and Stock Markets in Central and Eastern Europe

2019 ◽  
Vol 11 (14) ◽  
pp. 3985 ◽  
Author(s):  
Simona Moagăr-Poladian ◽  
Dorina Clichici ◽  
Cristian-Valeriu Stanciu
Keyword(s):  
Exchange Rates ◽  
Stock Markets ◽  
Sovereign Debt ◽  
Financial Integration ◽  
Debt Crisis ◽  
Eastern European ◽  
Sovereign Debt Crisis ◽  
European Sovereign Debt Crisis ◽  
Exchange Markets ◽  
Eastern European Countries

This paper analyses the link between exchange rates and stock markets in four Central and Eastern European countries. We simultaneously explore the comovements of foreign exchange markets and stock markets at the cross-country level and the link between these two markets within each country while employing a Dynamic Conditional Correlation Mixed Data Sampling (DCC-MIDAS) model. Such an approach to financial markets conveys a much more visible picture of the existing patterns of financial integration between these markets that would otherwise be neglected. The estimates reveal significant differences between the patterns of correlation in our sample countries. First, the paper finds a quite low degree of convergence between foreign exchange markets, with rising correlations during some of the crisis episodes. Second, both the 2004 European Union enlargement and the European sovereign debt crisis underpin the stock market comovements in the Central and Eastern European countries. Third, the correlations between the exchange rate returns and stock markets rise mostly during the European sovereign debt crisis and to a lesser extent during the global financial crisis, revealing signs of contagion and lower portfolio diversification opportunities. These results are of utmost relevance for the process of financial integration and they also have important implications for policy makers, risk management, and investors.

scholarly journals INVESTIGATING ABNORMAL VOLATILITY TRANSMISSION PATTERNS BETWEEN EMERGING AND DEVELOPED STOCK MARKETS: A CASE STUDY

2020 ◽  
Vol 21 (6) ◽  
pp. 1561-1592
Author(s):  
Cristi Spulbar ◽  
Jatin Trivedi ◽  
Ramona Birau
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Stock Markets ◽  
Financial Integration ◽  
Global Financial Crisis ◽  
Spillover Effects ◽  
Garch Models ◽  
Asymmetric Garch ◽  
Developed Stock Markets ◽  
The Impact

The main aim of this paper is to investigate volatility spillover effects, the impact of past volatility on present market movements, the reaction to positive and negative news, among selected financial markets. The sample stock markets are geographically dispersed on different continents, respectively North America, Europe and Asia. We also investigate whether selected emerging stock markets capture the volatility patterns of developed stock markets located in the same region. The empirical analysis is focused on seven developed stock market indices, i.e. IBEX35 (Spain), DJIA (USA), FTSE100 (UK), TSX Composite (Canada), NIKKEI225 (Japan), DAX (Germany), CAC40 (France) and five emerging stock market indices, i.e. BET (Romania), WIG20 (Poland), BSE (India), SSE Composite (China) and BUX (Hungary) from January 2000 to June 2018. The econometric framework includes symmetric and asymmetric GARCH models i.e. EGARCH and GJR which are performed in order to capture asymmetric volatility clustering, interdependence, correlations, financial integration and leptokurtosis. Symmetric and asymmetric GARCH models revealed that all selected financial markets are highly volatile, including the presence of leverage effect. The stock markets in Hungary, USA, Germany, India and Canada exhibit high positive volatility after global financial crisis.

scholarly journals Analysing portfolio diversification opportunities in selected stock markets of North and South America and their impact on the textile sector: An empirical case study

2021 ◽  
Vol 72 (04) ◽  
pp. 398-407
Author(s):  
RAMONA BIRAU ◽  
CRISTI SPULBAR ◽  
AJMAL HAMZA ◽  
EJAZ ABDULLAH ◽  
ELENA LOREDANA MINEA ◽  
...  
Keyword(s):  
Stock Market ◽  
Granger Causality ◽  
Stock Markets ◽  
Financial Integration ◽  
Stock Exchange ◽  
Portfolio Diversification ◽  
Causality Test ◽  
International Portfolio Diversification ◽  
Integration Test ◽  
Textile Sector

This empirical study investigates the financial integration linkages among the sample stock markets of Canada, Mexico,United States (for both New York Stock Exchange, i.e. NYSE and NASDAQ), Panama, Brazil, Chile, Peru, Venezuela,Jamaica, Trinidad, and Tobago during the period from January 2001 to April 2019. This research study also examinesthe impact of selected stock market dynamics on the textile sector. International portfolio diversification has been animportant subject of research in financial fraternity since the emergence of Modern Portfolio Theory in 1952. This studyexamines the portfolio diversification opportunities in the 11 stock markets of Americas.International diversificationamong stock market indices has proven to be fruitful in the past. Certain tests have been used to determine opportunitiesfor diversification are correlation test, pairwise co-integration test, multiple co-integration test and granger causality test.The empirical results show that stock market indices share low correlation among other and they are not highlyco-integrated whereas results of Granger causality test exhibit an unidirectional relationship among few stock marketsin short run.

scholarly journals STOCK MARKET EFFICIENCY IN AFRICA: EVIDENCE FROM RANDOM WALK HYPOTHESIS

2020 ◽  
Author(s):  
Rui Dias ◽  
◽  
Hortense Santos ◽  
Keyword(s):  
Random Walk ◽  
Financial Markets ◽  
Stock Markets ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Random Walk Hypothesis ◽  
Global Pandemic ◽  
Stock Market Efficiency ◽  
Variance Ratios ◽  
The Mean

This paper aims to test the efficient market hypothesis, in its weak form, in the stock markets of BOTSWANA, EGYPT, KENYA, MOROCCO, NIGERIA and SOUTH AFRICA, in the period from September 2, 2019 to September 2, 2020. In order to achieve this analysis, we intend to find out if: the global pandemic (Covid-19) has decreased the efficiency, in its weak form, of African stock markets? The results therefore support the evidence that the random walk hypothesis is not supported by the financial markets analyzed in this period of global pandemic. The values of variance ratios are lower than the unit, which implies that the yields are autocorrelated in time and, there is reversal to the mean, and no differences were identified between the stock markets analyzed. The authors consider that the results achieved are of interest to investors looking for opportunities for portfolio diversification in these regional stock markets.

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