A spatial analysis of international stock market linkages

Asgharian, Hossein; Heß, W. R.; Liu, Lu

doi:10.1016/j.jbankfin.2013.08.015

Cited by 136 publications

(92 citation statements)

References 37 publications

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“…However, apart from the geographic proximity used to capture spatial dependence across markets, there might be other factors driving the co-movements of asset prices. Fernandez-Aviles et al (2012) and Asgharian et al (2013) analyze spatial dependencies across stock markets using measures of economic distance between the countries. Fernandez-Aviles et al (2012) find that the co-movement across the stock markets is not driven by geographic distance but rather buy the FDI proximity of those markets.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The rationale is that the spillovers across regions can be explained by factors, such as migration (Gupta and Miller, 2012), wealth externalities (Clapp et al, 1995;Miao et al, 2011), infrastructure improvements (Holly et al, 2011), etc. However, recent research (FernandezAvilez et al, 2012Asgharian et al, 2013) shows that the physical distance may not be the best way to account for spatial co-movements. Indeed, measures of 'economic distance' have been introduced in an attempt to deal with the cross-sectional dependence of economic variables (see Conley and Topa, 2002;Pesaran et al, 2004).…”

Section: Introductionmentioning

confidence: 99%

“…Zhu et al (2013) show that the economic closeness is an important driver of the co-movements in house prices across US regions. Asgharian et al (2013) compare several measures of spatial proximity to find that bilateral trade best captures the international co-movements on the stock markets. Considering the financial innovations and the deregulation of the financial markets during the Great Moderation, it is thus important to go beyond the traditional measures of spatial co-movement and to account for the interconnectivity of the financial markets.…”

Section: Introductionmentioning

confidence: 99%

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Bank integration and co-movements across housing markets

Milcheva

Zhu²

2016

Journal of Banking & Finance

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This paper investigates whether bank integration measured by cross-border bank flows can capture the co-movements across housing markets in developed countries by using a spatial dynamic panel model. The transmission can occur through a global banking channel in which global banks intermediate wholesale funding to local banks. Changes in financial conditions are passed across borders through the banks' balance-sheet exposure to credit, currency, maturity, and funding risks resulting in house price spillovers. While controlling for country-level and global factors, we find significant co-movement across housing markets of countries with proportionally high bank integration. Bank integration can better capture house price comovements than other measures of economic integration. Once we account for bank exposure, other spatial linkages traditionally used to account for return co-movements across region -such as trade, foreign direct investment, portfolio investment, geographic proximity, etc. -become insignificant. Moreover, we find that the co-movement across housing markets decreases for countries with less developed mortgage markets characterized by fixed mortgage rate contracts, low limits of loan-to-value ratios and no mortgage equity withdrawal. JEL Classifications: C23, G15, F36, R3 Abstract This paper investigates whether bank integration measured by cross-border bank flows can capture the co-movements across housing markets in developed countries by using a spatial dynamic panel model. The transmission can occur through a global banking channel in which global banks intermediate wholesale funding to local banks. Changes in financial conditions are passed across borders through the banks' balance-sheet exposure to credit, currency, maturity, and funding risks resulting in house price spillovers. While controlling for country-level and global factors, we find significant co-movement across housing markets of countries with proportionally high bank integration. Bank integration can better capture house price comovements than other measures of economic integration. Once we account for bank exposure, other spatial linkages traditionally used to account for return co-movements across region -such as trade, foreign direct investment, portfolio investment, geographic proximity, etc. -become insignificant. Moreover, we find that the co-movement across housing markets decreases for countries with less developed mortgage markets characterized by fixed mortgage rate contracts, low limits of loan-to-value ratios and no mortgage equity withdrawal. JEL Classifications: C23, G15, F36, R3

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Bank integration and co-movements across housing markets

Milcheva

Zhu²

2016

Journal of Banking & Finance

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“…Asgharian et al (2013) used a spatial form of the gravity model and found that spatial dependencies and proximity matter for stock market synchronization. Liu (2013) created a dynamic panel gravity model of stock market correlations and found that telephone and internet information capacity and industrial structure similarities can help explain the stock market synchronization.…”

Section: Interdependence Of International Stock Marketsmentioning

confidence: 99%

Why Can Weak Linkages Cause International Stock Market Synchronization? The Mode-Locking Effect

Filer¹,

Selover

2014

International Journal of Financial Research

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This study investigates the synchronization between stock markets in different countries. International stock markets tend to synchronize with one another in what appears to be an international financial cycle, yet trade and capital flows between the stock markets do not appear to be strong enough for one stock market to "drive" fluctuations in another stock market. Why are these weakly linked financial markets synchronized? This study suggests that global stock market synchronization results from a "mode-locking" phenomenon, a nonlinear process in which even a weak coupling between oscillating systems like stock markets tends to synchronize the fluctuations between the systems. Simulations, econometric analysis, and spectral analysis investigate this mode-locking hypothesis. Analysis reveals modest support for the mode-locking hypothesis of international stock market synchronization.

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“…A spatial analysis of linkages between securities markets was carried among others by Asgharian et al (2013). On the basis of their research, they stated that the similarity with regard to the economies' components is the strongest source of linkages between stock markets but the connections that result from geographical neighborhood, bilateral FDI and stability of the bilateral exchange rate are important as well.…”

Section: Introductionmentioning

confidence: 99%

The Significance of Distance Between Stock Exchanges Undergoing the Process of Convergence: an Analysis of Selected World Stock Exchanges During the Period of 2004–2012

Szulc

Wleklińska²,

Górna³

et al. 2015

DEM

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A b s t r a c t. The paper concerns the convergence of selected world stock exchanges from the point of view of their development in the context of geographical and economic distance between them. It presents the methodological approach which points up the necessity of taking into account spatial and economic connections among stock markets in convergence analyses. The research includes 46 largest trading floors analyzed in the period of 2004-2012. The empirical data refer to six diagnostic variables acknowledged as the important determinants of the development of stock markets. K e y w o r d s: stock exchanges, convergence, physical and economic distance, connectivity matrix, spatial panel models. J E L Classification: C10, C12, C58, G15.

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A spatial analysis of international stock market linkages

Cited by 136 publications

References 37 publications

Bank integration and co-movements across housing markets

Bank integration and co-movements across housing markets

Why Can Weak Linkages Cause International Stock Market Synchronization? The Mode-Locking Effect

The Significance of Distance Between Stock Exchanges Undergoing the Process of Convergence: an Analysis of Selected World Stock Exchanges During the Period of 2004–2012

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