CONVERGENCE OF RETURNS ON CHINESE AND RUSSIAN STOCK MARKETS WITH WORLD MARKETS: NATIONAL AND SECTORAL PERSPECTIVES

Interest in examining the financial linkages of economies has increased in the wake of the 2008/9 global financial crisis. Applying the concepts of beta- and sigma-convergence of stock market returns, we assess changes over time in the degree of stock market integration of Russia and China with each...

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Bibliographic Details
Published in:National Institute economic review 2013-02, Vol.223 (223), p.R16-R34
Main Authors: Babecky, Jan, Komarek, Lubos, Komarkova, Zlatuse
Format: Article
Language:English
Subjects:
Bank stocks
Banking industry
Coefficients
Convergence
Disruption
Diversification
Economic crises
Economic crisis
Economic integration
Euro Zone
Forecasts and trends
Half lives
International finance
Political integration
Risk
Securities markets
Stock exchanges
Stock market indices
Stock market returns
Stock markets
Stocks
Territories
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Summary:Interest in examining the financial linkages of economies has increased in the wake of the 2008/9 global financial crisis. Applying the concepts of beta- and sigma-convergence of stock market returns, we assess changes over time in the degree of stock market integration of Russia and China with each other, as well as with respect to the United States, the Euro Area, and Japan. Our analysis is based on national and sectoral data spanning the period September 1995 to October 2010. Overall, we find evidence for gradually increasing convergence of stock market returns after the 1997 Asian financial crisis and the 1998 Russian financial crisis. Following a major disruption caused by the 2008/9 global financial crisis, the process of stock market return convergence resumes between Russia and China, as well as with world markets. Notably, the episode of sigma-divergence from the 2008/9 crisis is stronger for China than for Russia. We also find that the process of stock market return convergence and the impact of the recent crisis have not been uniform at the sectoral level, suggesting the potential for diversification of risk across sectors.
ISSN:0027-9501
1741-3036
DOI:10.1177/002795011322300103