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Int. J. Financial Stud. 2015, 3(4), 557-586; doi:10.3390/ijfs3040557

Do Markets Cointegrate after Financial Crises? Evidence from G-20 Stock Markets

1
Department of Accounting, Finance, Insurance and Risk Management, Scott College of Business, Indiana State University, Terre Haute, IN 47809, USA
2
Thailand Institute of Nuclear Technology (Public Organization), Ministry of Science and Technology, 16 Vibhavadi Rangsit Rd, Ladyao, Chatuchak, Bangkok 10900, Thailand
*
Author to whom correspondence should be addressed.
Academic Editor: Kuan Min Wang
Received: 22 August 2015 / Revised: 26 October 2015 / Accepted: 6 November 2015 / Published: 10 December 2015
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Abstract

The results of the single-equation cointegration tests indicate that patterns of cointegration in the two main and four sub-periods are not homogeneous. Two key findings emerge from the study. First, fewer stock markets cointegrated with S&P 500 during the crisis period than they did during the pre-crisis. In other words, as the 2008 financial crisis deepened, S&P 500 and G-20 stock indices moved towards less cointegration. The decreasing number of cointegrating relationships implies that the U.S. stock markets and other G-20 markets have experienced different driving forces since the start of the U.S. crisis. Second, among those markets that are cointegrated with S&P 500, they happened to be deeply affected by S&P and the shocks emerging from it. The 2007–2009 financial crises can be considered a structural break in the long-run relationship and may have resulted from effective joint intervention/responses taken by members of G-20 nations. View Full-Text
Keywords: financial crises; euro crises; stock markets-developed and developing; cointegration; vector auto regression; granger causality and variance decomposition financial crises; euro crises; stock markets-developed and developing; cointegration; vector auto regression; granger causality and variance decomposition
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Haque, M.; Shamsub, H. Do Markets Cointegrate after Financial Crises? Evidence from G-20 Stock Markets. Int. J. Financial Stud. 2015, 3, 557-586.

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Int. J. Financial Stud. EISSN 2227-7072 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
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