Dynamic transmissions between main stock markets and SME stock markets: Evidence from tropical economies

Nguyen, Thi Minh Trang; Chaiechi, Taha; Eagle, Lynne; Low, David

doi:10.1016/j.qref.2019.02.004

Cited by 6 publications

(8 citation statements)

References 68 publications

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“…They applied VECM and the results revealed the existence of a long-run relationship between the three financial indices. Nguyen et al (2019) investigated the dynamic linkages among equity markets of Hong Kong, Singapore, Thailand, and Malaysia. The results revealed that only Hong Kong's stock market shared a causal relationship.…”

Section: Literature Reviewmentioning

confidence: 99%

Co-integration and Causal Relationships: The Case of the Jordanian and Developed Stock Markets

Mugableh

2020

IJFR

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The main purpose of this study is to investigate co-integration and causal relationships among the Jordanian, the US, and the UK stock markets. The vector error correction model is applied using yearly stock market indices series for the period, 1978 – 2018. The results reveal the existence of co-integration and causal relationships among stock markets indices. These results indicate the scope for diversification profits, where the Jordanian investors secure higher levels of mean returns on the diversified portfolios. This study is important for individual investors and policy makers in macroeconomics and finance, as stock markets affect consumption, wealth, and capital flows. The contribution of this study to the present literature is threefold. Firstly, it adds to the empirical literature an up-to-date dataset and employs a dynamic and causal approach, vector error correction model, which establishes whether market long-run equilibrium (i.e., co-integration) is stable for stock markets of Jordan, the USA, and the UK. Secondly, it analyses the performance of the Amman stock exchange for the period 1978-2018. Finally, this paper has implications for international portfolio diversification. If stock markets are co-integrated, this implies that there is an opportunity of arbitrage activity. In other words, stock markets are moving together towards long-term, and there are limited possibilities of gaining abnormal returns by diversifying investment portfolios.

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Section: Literature Reviewmentioning

confidence: 99%

Co-integration and Causal Relationships: The Case of the Jordanian and Developed Stock Markets

Mugableh

2020

IJFR

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“…Fifth, the MENA SME markets are in their early stage of development and have specific features that set them apart from their more established counterparts. Relative to the Asian SME markets examined by Nguyen et al (2020), the SME markets in the MENA region are relatively smaller than their main board counterparts in terms of both market capitalization and number of listings. Thus, it is interesting to investigate the linkages between SME and main markets and determine how these markets have weathered the COVID-19 crisis.…”

Section: Introductionmentioning

confidence: 80%

“…Despite the extensive body of evidence on the linkages between large and small stocks listed in the same main market (see, among others, Karmakar 2010; Koulakiotis et al 2016;Lo and MacKinlay 1990), the potential linkages between SMEs and main stock markets have been investigated far less thoroughly. The few studies in this realm include those by Samitas et al (2006) and Nguyen et al (2020). Samitas et al (2006) found unidirectional Granger causality running from the main index to the parallel (second-tier) index in the Greek stock exchange.…”

Section: Introductionmentioning

confidence: 99%

“…Samitas et al (2006) found unidirectional Granger causality running from the main index to the parallel (second-tier) index in the Greek stock exchange. Nguyen et al (2020) examine both the return and volatility transmission between the main and second-tier markets in Hong Kong, Singapore, Thailand, and Malaysia. Their results show that significant unidirectional return transmission from the SME to the main market is present only in Hong Kong, while return transmission runs in the reverse direction in the remaining markets.…”

Section: Introductionmentioning

confidence: 99%

“…While an asymmetric return and volatility transmission from large to small stock portfolios and from main to SME markets is documented in most cases, there exists contradictory evidence suggesting a bilateral return and volatility spillovers between large and small portfolios and, even more remarkably, transmission in the opposite direction from the SME to the main market, which has been interpreted as a potential indirect influence of the SME market on economic development through the main market channel (Nguyen et al 2020). These mixed findings call for further research on the relation between main and SME markets in different contexts, especially during crisis periods, when diversification and hedging are highly sought after.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The COVID-19 Outbreak and Risk–Return Spillovers between Main and SME Stock Markets in the MENA Region

Al-Nassar

Makram

2022

IJFS

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This study investigates return and asymmetric volatility spillovers and dynamic correlations between the main and small and medium-sized enterprise (SME) stock markets in Saudi Arabia and Egypt for the periods before and during the COVID-19 pandemic. Return and volatility spillovers are modelled using a VAR-asymmetric BEKK–GARCH (1,1) model, while a VAR-asymmetric DCC–GARCH (1,1) model is employed to model the dynamic conditional correlations between these markets, which are then used to determine and explore portfolio design and hedging implications. The results show that while bidirectional return spillovers between the main and SME stock markets are limited to Saudi Arabia, shock and volatility spillovers have different characteristics and dynamics in both main–SME market pairs. In addition, the dynamic correlations between the main and SME markets are mostly positive and have notably increased during the COVID-19 pandemic, particularly in Saudi Arabia, suggesting that adding SME stocks to a main stock portfolio enhances its risk-adjusted return, especially during tranquil market phases. One practical implication of our results is that the development of SME stock markets can indirectly contribute to economic development via the main market channel and provide an avenue for portfolio diversification and risk management.

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Volatility Spillover and Connectedness Between SME and Main Markets of India and China

Behera,

Sahu,

Mahanta

2024

Asia-Pac Financ Markets

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Dynamic transmissions between main stock markets and SME stock markets: Evidence from tropical economies

Cited by 6 publications

References 68 publications

Co-integration and Causal Relationships: The Case of the Jordanian and Developed Stock Markets

Co-integration and Causal Relationships: The Case of the Jordanian and Developed Stock Markets

The COVID-19 Outbreak and Risk–Return Spillovers between Main and SME Stock Markets in the MENA Region

Volatility Spillover and Connectedness Between SME and Main Markets of India and China

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