Modelling long run comovements in equity markets: A flexible approach

Martins, Luís F.; Gabriel, Vasco J.

doi:10.1016/j.jbankfin.2014.05.029

Cited by 10 publications

(9 citation statements)

References 57 publications

(45 reference statements)

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“…However, similar tests conducted on the first log differences shows that the series are all stationary as we are able to reject the null hypothesis of unit root at 1% level for all the series. Hence, we conclude that the series are integrated of order 2 More technical details on the estimation and inferences can be found in Martins and Gabriel (2014 …”

Section: Datamentioning

confidence: 74%

“…This assumption may be too restrictive as in reality gold price and inflation may fluctuate due to business cycles that may lead to nonlinearity in the relationship. The only studies that accounted for temporary or permanent, smooth or dramatic shifts in the gold price-inflation relationship are Wang et al (2011) Martins and Gabriel (2014) which simultaneously accounts for long run co-movements amongst the variables, whilst endogenously allowing for well-documented structural shifts. In other words, the method we use allow for potential 'interruption' in the long run equilibria and it is based on break points generated stochastically and equilibrium term dynamics modelled as an AR(1) -depending upon an unobserved state process that is a stationary first-order Markov chain in two states, stationarity and non-stationarity.…”

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confidence: 99%

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Is gold an inflation-hedge? Evidence from an interrupted Markov-switching cointegration model

2016

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This paper investigates the inflation hedging role of gold price after controlling for the prices of other investment assets. We use annual data on the U.S. economy spanning from 1833 to 2013.We employ a recently developed flexible nonlinear approach that allows for potential 'interruption' in the long run equilibrium relationship in which the equilibrium term dynamics is modelled as an AR(1) depending upon an unobserved state process that is a stationary first-order Markov chain in two states, stationarity and non-stationarity. While, a battery of standard cointegration tests without and with breaks could not find evidence to support the inflation hedging role of gold, results from the flexible nonlinear approach indicate the existence of temporary cointegration between gold price and inflation during 1864, 1919, 1932, 1934, 1976, 1980 and 1982. The interruptions in the long-run relationship at different time periods seem to be associated with the different structural changes that affected the gold market.

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Section: Datamentioning

confidence: 74%

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confidence: 99%

Is gold an inflation-hedge? Evidence from an interrupted Markov-switching cointegration model

2016

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“…For investors, reduced stock market integration increases opportunities for international portfolio diversification. For policymakers, increased integration during economic crises may curtail national governments' ability to design appropriate stabilisation policies (Martins & Gabriel, 2014). For financial academia, this study expands the financial integration issue to a cross-field study.…”

Section: Discussionmentioning

confidence: 99%

“…It is indeed hard to assume that long-run relationships among stock market indices remain constant. Modelling asset market integration without considering the time-varying nature of financial linkages may result in misleading conclusions (Martins & Gabriel, 2014). Martins and Gabriel (2014) suggest that the degree of integration across equity markets is better viewed as time-varying.…”

Section: Introductionmentioning

confidence: 99%

“…Modelling asset market integration without considering the time-varying nature of financial linkages may result in misleading conclusions (Martins & Gabriel, 2014). Martins and Gabriel (2014) suggest that the degree of integration across equity markets is better viewed as time-varying. Following Zuo and Park (2011), this study is the first to apply a S.T.V.C.…”

Section: Introductionmentioning

confidence: 99%

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Did the S.A.R.S. epidemic weaken the integration of Asian stock markets? Evidence from smooth time-varying cointegration analysis

Chen

Lee

Lin

et al. 2018

Economic Research-Ekonomska Istraživanja

122

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The purpose of this study is to examine the effect of the Severe Acute Respiratory Syndrome (S.A.R.S.) epidemic on the long-run relationship between China and four Asian stock markets. To this end, we first employ the advanced smooth time-varying cointegration model to investigate the existence of a time-varying cointegration relation among these markets and then employ the difference-indifferences approach to analyse whether or not the S.A.R.S. epidemic impacted the long-run relation between China and these four markets during the period 1998-2008, covering 5 years before and after the S.A.R.S. outbreak. Our results support the existence of a time-varying cointegration relation in the aggregate stock price indices, and that the S.A.R.S. epidemic did weaken the long-run relationship between China and the four markets. Therefore, stockholders and policy makers should be concerned about the influence of catastrophic epidemic diseases on the financial integration of stock market in Asia.

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When cointegration is interrupted: Price transmission analysis in the Italian dairy‐feed industry

Cattivelli¹,

Antonioli

2023

Agribusiness

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We analyze price transmission dynamics in the underinvestigated feed supply chain, applying a special case of the Threshold Vector Error Correction model where the cointegrating relationship is interrupted. Weekly Italian dairy feed and corn prices are used, finding evidence of asymmetric price transmission when the feed industry's margins are squeezed and highly volatile. The proposed Interrupted Threshold Cointegration model represents a valid complement to existing threshold and regimeswitching techniques, allowing for the application of an agile nonstructural error correction model when standard cointegration tests fail to detect any long-run relationship between price series.

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Modelling long run comovements in equity markets: A flexible approach

Cited by 10 publications

References 57 publications

Is gold an inflation-hedge? Evidence from an interrupted Markov-switching cointegration model

Is gold an inflation-hedge? Evidence from an interrupted Markov-switching cointegration model

Did the S.A.R.S. epidemic weaken the integration of Asian stock markets? Evidence from smooth time-varying cointegration analysis

When cointegration is interrupted: Price transmission analysis in the Italian dairy‐feed industry

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