Globalization and Granger Causality in International Stock Markets

Rui Menezes
International Journal of Finance, Insurance and Risk Management, Volume 3, Issue 1, 413, 2013
DOI: 10.35808/ijfirm/68

Abstract:

This paper analyzes the process of stock market globalization on the basis of cointegration and Granger causality tests. Granger causality is based on regression modelling and typically captures current and past causal relationships in the data. The dataset used in our empirical analysis was drawn from DataStream and comprises the natural logarithm of relative stock market indexes since 1973 for the G7 countries. The main results point to the conclusion that significant causal effects occur in this context with well-defined causal directions. There is also evidence that stock markets are closely related in the long-run over the 36 years analyzed and, in this sense, one may say that they are globalized. As expected, there is evidence that the US stock market dominates in general over the remaining markets.


Cite Article (APA Style)