2004
DOI: 10.1016/j.gfj.2003.10.008
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Identification of common and idiosyncratic shocks in real equity prices: Australia, 1982–2002

Abstract: A structural vector autoregressive (SVAR) model of real equity prices in Australia is specified to contain common shocks in international equity markets and domestic shocks in Australian financial and goods markets. Common shocks are identified through the long-run comovements of international equity markets, resulting in the model being characterized as having more shocks than variables. The empirical results show that the dot-com crisis of 2000 causes Australian real equity values to depreciate significantly… Show more

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Cited by 12 publications
(16 citation statements)
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“…The current credit crises caused by the high defaults in the US sub-prime market and its spill-over effects to other economies in both developed and developing part of the world have further highlighted the need to investigate the role of foreign institutional investors in emerging stock markets. Although there are a number of studies which provide evidence of increasing integration of emerging markets with the global markets (Dungey et al, 2004;Chelley-Steeley, 2005;Syriopoulos, 2007), none have so far explicitly examined the role played by foreign investors on the long-and short-run financial linkages of emerging markets. In view of the global spread of current financial crisis and its likely implications for a number of emerging markets, it is both topical and theoretically desirable to understand the influence of foreign investors on the process of integration of emerging equity markets with the global markets.…”
Section: Introductionmentioning
confidence: 99%
See 1 more Smart Citation
“…The current credit crises caused by the high defaults in the US sub-prime market and its spill-over effects to other economies in both developed and developing part of the world have further highlighted the need to investigate the role of foreign institutional investors in emerging stock markets. Although there are a number of studies which provide evidence of increasing integration of emerging markets with the global markets (Dungey et al, 2004;Chelley-Steeley, 2005;Syriopoulos, 2007), none have so far explicitly examined the role played by foreign investors on the long-and short-run financial linkages of emerging markets. In view of the global spread of current financial crisis and its likely implications for a number of emerging markets, it is both topical and theoretically desirable to understand the influence of foreign investors on the process of integration of emerging equity markets with the global markets.…”
Section: Introductionmentioning
confidence: 99%
“…Using Australian data, Roca (1999) examines the price linkages with the major trading partners and finds short-term dynamic linkages with markets in the US and UK. Further, Dungey et al (2004) reports that equity markets in Australia are influenced by shocks common to all other markets around the world. Their study concludes that the US market plays a significant role in explaining the Australian equity market's movement whilst Australia's domestic output has minimal impact on its own equity market.…”
Section: Introductionmentioning
confidence: 99%
“…The stimulative effects reached a peak in 2000Q4 following the burst of the dot-com bubble. This may be a reflection of the structure of the Australian economy as pointed out by Dungey et al (2004).…”
Section: Outcomes For Gdpmentioning
confidence: 93%
“…The types of shocks studied could be expanded by including a set of common shocks to produce a multifactor capital asset pricing model along the lines of Bekeart, Harvey, and Ng (2003). Alternatively, the common shocks could be identified implicitly following the approach of Dungey, Fry, and Martin (2003). An expanded set of variables could also be included in the VAR to capture the market fundamentals underlying the risk premia of the emerging markets.…”
Section: Conclusion and Suggestions For Future Researchmentioning
confidence: 99%
“…In response to the Russian and LTCM crises, bond spreads jumped globally, even for otherwise seemingly unconnected countries (Kumar and Persaud, 2001; Committee on the Global Financial System, 1999; J.P. Morgan, 1999;and Bank of England, 2002). The Russian and LTCM crises were reinforcing, and it seems likely that global risk conditions influenced other financial markets, including the equity markets, and exacerbated the conditions facing Brazil (Dungey, Fry, González-Hermosillo, andMartin, 2002, 2003).…”
Section: Introductionmentioning
confidence: 99%