Cointegration of International Stock Market Indices
August 1, 1994
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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.
Subject: Asset prices, Financial markets, International capital markets, Prices, Securities markets, Stock markets
Keywords: Asset prices, augmented term, integrating vector, integration relationship, International capital markets, market integration, North America, price, price series, price variable, Securities markets, short-run price dynamics, stock market, Stock markets, test statistics, WP
Pages:
16
Volume:
1994
DOI:
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Issue:
094
Series:
Working Paper No. 1994/094
Stock No:
WPIEA0941994
ISBN:
9781451950700
ISSN:
1018-5941
