Inter-market information flow: a nonlinear approach

Abstract

This article attempts to characterize the pattern of information flows between the stock markets by determining mean and variance causal relationships. A two-step procedure proposed by Cheung and Ng (1996) is used. Stock market returns are specified as Autoregressive-Generalized Autoregressive Conditional Heteroskedasticity (AR-GARCH) models with Monday and Friday effects. Stock markets of our sample are chosen to analyse the main causes of information flows documented in the literature: linkage between economic fundamentals and the time lag between the stock markets' opening hours. Results provide evidence of nonlinear causality between stock markets, even when linear Granger causality is rejected. Causality seems to be attributed to both economic linkage and time lag between market openings.

Federal Reserve Communications and Emerging Equity Markets

“…In our view, the differences between American and non-American markets may have yet another cause. In a different context, Boubaker and Sebai (2009) find stronger intracontinent causalities in stock markets than between stock markets in different continents.…”

Federal Reserve Communications and Emerging Equity Markets

“…In our view, the differences between American and non‐American markets may have yet another cause. In a different context, find stronger intracontinent causalities in stock markets than between stock markets in different continents. They explain this finding by the fact that in the former case, any significant correlation is realized on the same calendar day, while there is a time lag between continents.…”

Detecting financial markets contagion using copula functions

“…Following these researches, Boubaker and Sebai (2009) [4] analyzed linkages between economic fundamentals and the time lag between stock market opening hours to characterize the pattern of information flows between stock markets. Results showed that there is non-linear causality which seems to be attributed to both economic linkage and the time lag between market openings.…”