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Open AccessArticle

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
Int. J. Financial Stud. 2015, 3(4), 557-586; https://doi.org/10.3390/ijfs3040557
Received: 22 August 2015 / Revised: 26 October 2015 / Accepted: 6 November 2015 / Published: 10 December 2015
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
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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