Cointegration of International Stock Market Indices

Author/Editor:

Ray Yeu-Tien Chou ; Victor Ng ; Lynn K. Pi

Publication Date:

August 1, 1994

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

In this paper, we derive evidence on the integration of international stock markets from the cointegration properties of international stock market prices. Using the multivariate cointegration test of Johansen, we find that the set of six country stock price indices, including that of the United States, Canada, the United Kingdom, France, Germany, and Japan are cointegrated. The results suggest that there are long-run equilibrium relationships among the stock market prices. Subsample and subgroup analyses also indicate that the cointegration relationships have become stronger over time. This is consistent with greater stock market integration amid the increasing liberalization and globalization of capital markets.

Series:

Working Paper No. 1994/094

Subject:

Asset prices Financial markets International capital markets Prices Securities markets Stock markets

English

Publication Date:

August 1, 1994

ISBN/ISSN:

9781451950700/1018-5941

Stock No:

WPIEA0941994

Pages:

16

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