Open AccessSTOCK MARKET COINTEGRATION: EVIDENCE FROM DEVELOPED AND DEVELOPING EQUITY MARKETS
Author(s) -
Waqas Siddique,
Muhammad Usman Arshad,
Muhammad Sufian Sufiyan,
Sohail Aslam,
Fahad Najeeb
Publication year - 2016
Publication title -
pakistan business review
Language(s) - English
Resource type - Journals
eISSN - 2521-005X
pISSN - 1561-8706
DOI - 10.22555/pbr.v17i4.550
Subject(s) - cointegration , economics , equity (law) , granger causality , econometrics , stock market , financial economics , diversification (marketing strategy) , developing country , variance decomposition of forecast errors , monetary economics , business , economic growth , political science , paleontology , marketing , biology , horse , law
This study examined the relationship between KSE and stock markets of developed and developing countries for the period of 2000- 2012. Cointegration approach showed that one cointegration equation exists in KSE and developed countries equity markets and two cointegration equations exist in KSE and developing countries equity markets case. Granger causality test showed a uni-directional relationship between KSE and developed and developing markets, and a bi-directional relationship with Taiwan’s equity market. Variance decomposition analysis showed that most of the changes in KSE are due to its own dynamics in both the developed and developing markets. Correlation matrix shows that there is a weak or no correlation between the KSE and developed and developing countries so the benefit of diversification can be achieved by investing in KSE.
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