Convergence of Returns on Chinese and Russian Stock Markets with World Markets: National and Sectoral Perspectives

Abstract

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.

Do Short‐ and Long‐Term Environmental Investments Follow the Same Path?

“…The null hypothesis of non‐cointegration between all five indices but also the ten bivariate analyses were not rejected by the trace test and the maximum value test, for the 5% significance level, which is not consistent with the conclusions drawn from other studies, including Caporale et al (), An and Brown (), Samitas and Kenourgios (), Tripathi and Sethi (), and Babecký et al (), obtained from conventional indices. In all these studies, the authors have identified some co‐integrating vectors.…”

“…Empirical literature on long‐term relationships between international stock markets has shown diverging results, echoing conclusions reached in the literature on short‐term indices. In using Johansen cointegration tests, several studies have identified a common stochastic trend among international stock market indices (Caporale et al, ; An & Brown, ; Samitas & Kenourgios, ; Babecký et al, ; Tripathi & Sethi, ).…”

“…Babecký et al (), in analysing the existence of cointegration relations between the G8 countries for 1995 and 2010, identified several cointegrating vectors. An and Brown () used the same methodological approach to find a significant correlation between the American and Chinese stock markets.…”

Environmental Investment Versus Traditional Investment: Alternative or Redundant Pathways?

“…The study of the long-term links between stock markets has also received much attention from researchers, mostly using the approaches of Johansen (1988) and Pesaran et al (2001). Using the first approach, Syriopoulos (2007), Raj and Dhal (2008), Caporale, Erdogan, and Kuzin (2009), Syriopoulos and Roumpis (2009), An and Brown (2010), Samitas and Kenourgios (2011), Tripathi and Sethi (2012), and Babecký, Komárek, and Komárková (2012) concluded that there was a common stochastic trend between the international stock indices they considered and identified several cointegrating vectors. In the opposite direction but also using Johansen’s proposal, the works of Olusi and Majid (2008), Majid and Kassim (2010), and Karim, Kassim, and Arip (2010) did not identify equilibrium relationships in the long term between the stock markets they studied.…”

Emerging Markets Integration in Latin America (MILA) Stock Market Indicators: Chile, Colombia, and Peru

“…Interest to examine the links between financial markets and economies is evident during the last decade. Interest to examine financial ties of the economies has increased due to global financial crisis from 2008 to 2009 (Babecky et al, 2012). The authors state that this economic and financial crisis brought greater awareness that the cost of financial integration is very important, and has such a high significance as the benefits of this.…”