On the stability of long-run relationships between emerging and US stock markets |
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| Affiliation: | 1. Institute of Environmental Sciences (CML), Leiden University, Leiden, The Netherlands;2. Netherlands Organisation for Applied Scientific Research (TNO), The Hague, The Netherlands;1. Department of Finance and Accounting, University of Tunis El Manar, Tunis, Tunisia;2. Energy and Sustainable Development (CESD), Montpellier Business School, Montpellier, France;3. COMSATS Institute of Information Technology, Islamabad, Pakistan;4. Lebow College of Business, Drexel University, Philadelphia, United States;5. College of Business and Economics, Qatar University, Qatar;6. Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (Szabist), Islamabad, Pakistan;7. Department of Economics and Finance, College of Economics and Political Science, Sultan Qaboos University, Muscat, Oman |
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| Abstract: | While most studies have found no cointegration between emerging and US stock markets, some recent studies do find a long-run relationship exists between these markets. In view of these mixed findings, this study examines the stability of long-run relationships between a number of emerging stock markets and the US stock market using recursive cointegration analysis. The results show that no long-run relationship exists between emerging markets and the US market over most of the sample period throughout 1997. However, we do find clear evidence of cointegration in response to the recent global emerging market crisis in 1997–1998. We conclude that significant crisis events can change the degree of cointegration between international stock markets and, therefore, need to be taken into account in studies of long-run relationships between international stock markets. |
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