The understanding of dependent structure and co-movement of world stock exchanges under the economic cycle

• Main Authors: Songsak Sriboonchitta, Chukiat Chaiboonsri, Jittima Singvejsakul
• Format: Book Series
• Published: 2018
• Online Access: https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=85037824067&origin=inward; http://cmuir.cmu.ac.th/jspui/handle/6653943832/43884
• Institution: Chiang Mai University

© Springer International Publishing AG 2018. This study was to focus on the patterns of economic booms (bull markets) and recessions (bear markets) among world stock exchanges such as Europe (Euro Stoxx), USA (S & P 500), Asia (SSE composite index and Nikkei 225 index) and ASEAN (FTSE ASEAN). Monthly data was collected during 2000 to 2016. Econometrically, we employed Markov Switching Bayesian Vector Autoregressive model (MSBVAR) to determine regional switches within these financial data sets as well as CD-Vine copula approaches was used to explore the contagions and patterns of structural dependences. To clarify the connectional details in each type of switching regimes, the results presented the Elliptical copula was chosen and it indicated these monthly collected data contained symmetrical dynamics co-movements. In addition, it implied the stock markets were assumed to have small fluctuations since the governments had stable policies to control the risk and asymmetric information in financial markets efficiently. Base on CD-Vine copula trees, the results indicated Asia and European stock markets had a strongly dependence in economic booms and recessions during the pre-crisis period (2000 to 2008). Conversely, in the post-crisis period, the US stock market and ASEAN stock market became the strong dependence with Europe. This meant that capital flows was mostly transferred between Europe and Asia financial markets during the pre-crisis periods (2009 to 2016). After that, the direction of capital flows were changed dramatically to the US stock market in the post-crisis periods. Predictively, this seems that the capital flows will return to European and US financial market, which these two continents have a strongly long-term financial dependence and deeply positive diplomacy.