This article investigates international stock market integration in largest (based on nominal GDP and purchasing power parity GDP) four developed namely USA, EMU, Japan and UK and two Asian emerging namely China and India international stock markets over the period June 1994 to June 2009. To model stock market integration we estimate a dynamic version of international capital asset pricing mode...

This paper investigates how China’s stock market reforms have affected the stock market linkages between China and Korea, Japan and the US respectively. We firstly use a 4 × 4 asymmetric GARCH-BEKK model and a series of likelihood ratio tests to uncover China’s regional and global linkages between 1992 and 2010 and during three sub-periods representing the stages of the Chinese reforms. The res...

This paper examines the linkages between the Russian stock market and those of its largest neighbors in Central and Eastern Europe, and the world stock markets over the 10 year period 1995-2004. What we find is that there was a major change in the nature of these relationships after the so called Russian Crisis of 1997-1998. The nature of this change is such that we can no longer rely on the th...

As international financial markets have become increasingly interdependent, new evidence on international spillover effects has widely been discussed around the globe. However, the MENA region has received little attention concerning international transmission of stock market movements. In this paper, we discuss international spillover effects between the major developed markets (U.S., Japan an...

The number of stock markets in African countries has doubled over the last 7years. Although these markets remain small and illiquid, they are growing rapidly, and will become an increasingly important part of many African economies. Using examples taken from experience in other developing regions and Africa’s recent past, this paper evaluates the common economic criticisms of stock markets and ...

Credit markets play an important role in the macroeconomy and credit market data is often used to predict both future macroeconomic and stock market performance. In this paper we propose a tractable general equilibrium asset pricing model with heterogeneous firms that links movements in stock and bond markets to macroeconomic activity. The model suggests that movements in risk premia in corpora...

We present a behavioral stock market model in which traders are driven by greed and fear. In general, the agents optimistically believe in rising markets and thus buy stocks. But if stock prices change too abruptly, they panic and sell stocks. Our model mimics some stylized facts of stock market dynamics: (1) stock prices increase over time, (2) stock markets sometimes crash, (3) stock prices s...

This paper develops a model of trading in stock and stock index security markets in the presence of transaction costs. We show that the introduction of stock index market improves the dissemination of market-wide information and index trading is more informative about stock market price movements than stock trading. The model generates rich implications on the informativeness of the stock index...

We propose a model of an incomplete markets economy with production, in which the firm acts as financial innovator by issuing claims against its stock. The firm’s objective is to maximize its adjusted value, which is the sum of the market value and the shareholders’ surplus from their trades in the stock markets. If a firm maximizes its adjusted value, then its financial policy is relevant (i.e...

Researchers have reported mispricing in index options markets. This study further examines the efficiency of the S&P 500 index options market by testing theoretical pricing relationships implied by no-arbitrage conditions. The effect of a traded stock basket, Standard and Poor’s Depository Receipts (SPDRs), on the link between index and options markets is also examined. Pricing efficiency withi...