Author(s): Lin, CM (Lin, Cho-Min); Cheng, WH (Cheng, Wan-Hsiu)
Title: Economic determinants of comovement across international stock markets: the example of Taiwan and its key trading partners
Source: APPLIED ECONOMICS, 40 (9): 1187-1205 2008 Language: English
Document Type: Article
KeyWords Plus: EXCHANGE-RATE VOLATILITY; COMMON STOCHASTIC TRENDS;
TRANSMISSION; RETURNS
Abstract: This study uses the multinomial logit model in which comovements are categorized into three outcomes, namely (i) negative comovements, (ii) positive comovements and (iii) no comovements, with the purpose of the empirical analysis being to investigate the economic determinants that affect the comovement relationships in the stock markets for Taiwan and four major trading partners (Mainland China, United States, Japan and Hong Kong) using daily data covering the period from 1994 to 2004. The period under study is further divided into three sub-periods, i.e. the period before the Asian financial crisis, that during the Asian financial crisis and that after the Asian financial crisis, in order to determine whether the factors influencing the comovements in the stock market returns of Taiwan and its trading partners actually change over time. In addition, this study differs from earlier studies that only emphasized the analysis of statistical significance in that it attaches importanace to analysing both the statistical and economic significance of the factors affecting comovements. The empirical results indicate that, regardless of whether it is the period during or after the financial crisis that is being considered, the volatility of stock market returns and the rate of change in the exchange rate are both important factors that affect comovement. In addition, interest rate differentials play an increasingly important role in the period after the financial crisis.
Addresses: [Lin, Cho-Min] Ling Tung Univ, Dept Finance, Taichung, Taiwan; [Cheng, Wan- Hsiu] Asia Univ, Dept Finance, Taichung, Taiwan
Reprint Address: Lin, CM, Ling Tung Univ, Dept Finance, 1 Lingtung Rd,Nantun 408, Taichung, Taiwan.
E-mail Address: chomin@ms6.hinet.net
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Publisher: ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
Publisher Address: 4 PARK SQUARE, MILTON PARK, ABINGDON OX14 4RN,
OXFORDSHIRE, ENGLAND ISSN: 0003-6846
DOI: 10.1080/00036840600771262 29-char Source Abbrev.: APPL ECON ISO Source Abbrev.: Appl. Econ.
Source Item Page Count: 19 Subject Category: Economics ISI Document Delivery No.: 291UK
