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A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates
In this study, we assess the dynamic evolution of short-term correlation, long-term cointegration and Error Correction Model (hereafter referred to as ECM)-based long-term Granger causality between each pair of US, UK, and Eurozone stock markets from 1980 to 2015 using the rolling-window technique....
Autores principales: | , , , |
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Formato: | Online Artículo Texto |
Lenguaje: | English |
Publicado: |
Public Library of Science
2018
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Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5847242/ https://www.ncbi.nlm.nih.gov/pubmed/29529092 http://dx.doi.org/10.1371/journal.pone.0194067 |
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author | Chen, Yanhua Mantegna, Rosario N. Pantelous, Athanasios A. Zuev, Konstantin M. |
author_facet | Chen, Yanhua Mantegna, Rosario N. Pantelous, Athanasios A. Zuev, Konstantin M. |
author_sort | Chen, Yanhua |
collection | PubMed |
description | In this study, we assess the dynamic evolution of short-term correlation, long-term cointegration and Error Correction Model (hereafter referred to as ECM)-based long-term Granger causality between each pair of US, UK, and Eurozone stock markets from 1980 to 2015 using the rolling-window technique. A comparative analysis of pairwise dynamic integration and causality of stock markets, measured in common and domestic currency terms, is conducted to evaluate comprehensively how exchange rate fluctuations affect the time-varying integration among the S&P 500, FTSE 100 and EURO STOXX 50 indices. The results obtained show that the dynamic correlation, cointegration and ECM-based long-run Granger causality vary significantly over the whole sample period. The degree of dynamic correlation and cointegration between pairs of stock markets rises in periods of high volatility and uncertainty, especially under the influence of economic, financial and political shocks. Meanwhile, we observe the weaker and decreasing correlation and cointegration among the three developed stock markets during the recovery periods. Interestingly, the most persistent and significant cointegration among the three developed stock markets exists during the 2007–09 global financial crisis. Finally, the exchange rate fluctuations, also influence the dynamic integration and causality between all pairs of stock indices, with that influence increasing under the local currency terms. Our results suggest that the potential for diversifying risk by investing in the US, UK and Eurozone stock markets is limited during the periods of economic, financial and political shocks. |
format | Online Article Text |
id | pubmed-5847242 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2018 |
publisher | Public Library of Science |
record_format | MEDLINE/PubMed |
spelling | pubmed-58472422018-03-23 A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates Chen, Yanhua Mantegna, Rosario N. Pantelous, Athanasios A. Zuev, Konstantin M. PLoS One Research Article In this study, we assess the dynamic evolution of short-term correlation, long-term cointegration and Error Correction Model (hereafter referred to as ECM)-based long-term Granger causality between each pair of US, UK, and Eurozone stock markets from 1980 to 2015 using the rolling-window technique. A comparative analysis of pairwise dynamic integration and causality of stock markets, measured in common and domestic currency terms, is conducted to evaluate comprehensively how exchange rate fluctuations affect the time-varying integration among the S&P 500, FTSE 100 and EURO STOXX 50 indices. The results obtained show that the dynamic correlation, cointegration and ECM-based long-run Granger causality vary significantly over the whole sample period. The degree of dynamic correlation and cointegration between pairs of stock markets rises in periods of high volatility and uncertainty, especially under the influence of economic, financial and political shocks. Meanwhile, we observe the weaker and decreasing correlation and cointegration among the three developed stock markets during the recovery periods. Interestingly, the most persistent and significant cointegration among the three developed stock markets exists during the 2007–09 global financial crisis. Finally, the exchange rate fluctuations, also influence the dynamic integration and causality between all pairs of stock indices, with that influence increasing under the local currency terms. Our results suggest that the potential for diversifying risk by investing in the US, UK and Eurozone stock markets is limited during the periods of economic, financial and political shocks. Public Library of Science 2018-03-12 /pmc/articles/PMC5847242/ /pubmed/29529092 http://dx.doi.org/10.1371/journal.pone.0194067 Text en © 2018 Chen et al http://creativecommons.org/licenses/by/4.0/ This is an open access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. |
spellingShingle | Research Article Chen, Yanhua Mantegna, Rosario N. Pantelous, Athanasios A. Zuev, Konstantin M. A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates |
title | A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates |
title_full | A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates |
title_fullStr | A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates |
title_full_unstemmed | A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates |
title_short | A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates |
title_sort | dynamic analysis of s&p 500, ftse 100 and euro stoxx 50 indices under different exchange rates |
topic | Research Article |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5847242/ https://www.ncbi.nlm.nih.gov/pubmed/29529092 http://dx.doi.org/10.1371/journal.pone.0194067 |
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