On the Linkages of the Stock Markets of the NAFTA Countries: Fundamentals or Speculative Bubbles? |
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Authors: | Christian Pierdzioch |
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Institution: | Department of Economics , Helmut-Schmidt-University , Hamburg , Germany |
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Abstract: | We analyze whether the linkages between the stock markets of the NAFTA member countries (Canada, Mexico, and the United States) reflect movements in fundamentals or speculative bubbles. To this end, we estimate a state-space model to decompose the stock market indexes of the three NAFTA member countries into fundamentals and speculative bubbles. We analyze the linkages of the three stock markets by means of cointegration techniques. Evidence of cointegration linkages between fundamentals is stronger than evidence of cointegration linkages between speculative bubbles. |
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Keywords: | NAFTA fundamentals speculative bubbles state-space model cointegration analysis |
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