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Economic research - Ekonomska istraživanja, Vol. 32 No. 1, 2019.

Original scientific paper

https://doi.org/10.1080/1331677X.2018.1550001

Financial cointegration and spillover effect of global financial crisis: a study of emerging Asian financial markets

Saqib Gulzar orcid id orcid.org/0000-0002-0352-5801 ; COMSATS Institute of Information Technology, Wah Cantt, Pakistan
Ghulam Mujtaba Kayani ; COMSATS Institute of Information Technology, Islamabad, Pakistan
Hui Xiaofen ; School of Management Sciences, Harbin Institute of Technology, PR China
Usman Ayub ; COMSATS Institute of Information Technology, Islamabad, Pakistan
Amir Rafique ; COMSATS Institute of Information Technology, Islamabad, Pakistan

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Abstract

This paper examines the financial cointegration and spillover effect of the global financial crisis to emerging Asian financial markets (India, China, Pakistan, Malaysia, Russia and Korea). The analysis used daily stock returns, divided into three time periods: pre-, during and post-crisis from 1 July 2005 to 30 June 2015. We applied the Johansen and Juselius cointegration test, the vector error correction model (V.E.C.M.) and the G.A.R.C.H.-B.E.K.K. model for an examination of integration and conditional volatility. We find long-term cointegration between the U.S. market and emerging stock markets, and the level of cointegration increased after the crisis period. The V.E.C.M. and impulse response function reveal that a shock in the U.S. financial market has a short-term impact on the returns of emerging financial markets. Past shocks and volatility have more effect on the selected stock markets during all time periods. The Korea Composite Stock Price Index and the Bombay stock exchange (B.S.E.) are the only stock markets that have cross-market news and volatility spillover effects during the crisis period. After the crisis period, news effects are positive on the B.S.E. and the Russian Trading System and have a negative effecton the Kuala Lumpur Stock Exchange and the Shanghai Stock Exchange.

Keywords

Cointegration; global financial crisis; V.E.C.M.; G.A.R.C.H.-B.E.K.K. model; volatility spillover; emerging Asian markets

Hrčak ID:

228566

URI

https://hrcak.srce.hr/228566

Publication date:

22.1.2019.

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