Propagative causal price transmission among international stock markets: Evidence from the pre- and post globalization period

• Published in: Global finance journal 2002-01, Vol.13 (1), p.63
• Main Authors: A Mansur M Masih, Masih, Rumi
• Format: Article
• Language: English
• Subjects: Causality; Cointegration analysis; Globalization; International finance; Securities markets; Stock exchanges; Stock prices; Studies
• ISSN: 1044-0283; 1873-5665
• DOI: 10.1016/S1044-0283(02)00039-X

This paper examines the patterns of dynamic linkages among national stock prices of 6 major international stock markets with particular reference to what impact the development of global markets had upon the leading stock markets, such as the US, Japan, and UK. In particular, the focus of this paper is in what ways, if any, the role of these leading markets has changed since globalization. The analysis employs recent time series techniques to a data set that consists of 2 nonoverlapping samples of monthly prices defining preglobalization and postglobalization. Given the generality of applying several techniques, which provide an overall assessment of the robustness of results generated, the findings contrast previous research, which discovered a lack of interdependence during the period prior to the 1980s. In particular, results broadly tend to indicate: that 1. globalization seems to have had a dramatic effect on the Japanese market, which transformed from a strong endogenous preglobalization market to a strong exogenous market after globalization; 2. the US market, in relation to other markets, was the only market not to be affected in terms of its resilience as a world market leader over both periods; 3. in response to globalization, the UK market appears to have reacted in an opposite manner to the Japanese market, although not to the same extent as the Japanese; and 4. although the Japanese market became relatively markedly exogenous after globalization, both the US and the UK markets, however, appear to have maintained their substantial contributions towards explaining the fluctuations of most of the other markets in both periods.