Literature Review Sr. No. Title 1.

Stock Market Integration Between Three CEECs, Russia and the UK

Author Guglielmo Maria Caporale & NicolaSpag nolo

Objective To examine linkages between the stock markets of three Central and Eastern European countries(CEECs ), specifically the Czech Republic, Hungary, and Poland, and both the UK and Russia. 1) comovements in exchange rates from a comprehensive sample of 12 Asian countries, namely, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand, China, Japan, India and Pakistan. 2) Study crosscountry contagion within foreign exchange markets of the above stated sample countries.

Methodology Tri-variate VARGARCH(1,1)-inmean model to examine linkages between the stock markets of three Central and Eastern European countries(CEECs),cr oss-correlations, GARCH modeling & co-integration analysis

Finding The empirical finding suggests that there is significant co-movement (interdependence) of these CEEC markets with both the Russian and the UK ones. CEEC stock markets have become even more correlated with the UK after the EU accession suggesting contagion and a higher degree of integration associated with EU membership

2.

Financial Market Contagion: Evidence from Asia Using Fraction Cointegration and Multivariat e GARCH

Ahmed M. Khalid & Gulasekara n Rajaguru

Fraction Co- We find evidence of strong integration, inter-market linkages Multivariate within Asian currency GARCH markets in the full sample Approach and co and the post-crisis period. integration The evidence is not so strong during the pre-crisis sample period. The results do not support strong currency linkages within non-crisis-hit Asian (NCA) countries. However, the NCA countries are found to be linked to currency markets in the crisis-hit countries of EA region. The results also support the hypothesis of contagion due to a common creditor. The results suggests that a shock in East Asian market that causes Japanese yen to change could be transmitted to a non-crisishit Asian country such as Pakistan due to the fact that Japan serves as a common creditor.

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CoHafiz Al To explore The long-term There is evidence of comovement Asad Bin dynamics of relationships integration among the of Hoque stock price among the markets markets demonstrating Bangladesh movements of are analyzed that stock prices in the stock an emerging Using the Johansen countries studied here market market, and Juselius share a common stochastic with other Bangladesh with multivariate co- trend. Impulse response markets that of USA, integration analysis shows that Co Japan and India. approach. Short- Shocks to the US market do integration run dynamics are have an impact on the and error Captured through Bangladesh market. The correction vector error evidence of Bangladesh approach correction models. Stock market responding to Further shocks in the Indian market investigation on is weak. Shocks to the short-run dynamics Japanese market do not is generate a response in the Carried out Bangladesh market through impulse response analysis. Data driven Chiu-Che T To research the The objective is to The finding is that the modeling seng correlation find out the predictive results when of cousing artificial correlation among using one market to movement intelligent tools markets so it can predict another is above 50 among among be used for trend percent and higher, which internation International prediction. is much better than al stock stock markets The stock price random walk. market issuing for the data from various companies. companies that have issued stock Indifferent countries were used to produce analysis for predictive purposes. Various artificial intelligent tools were used and the predictive performance among them compared. Is this Time Yushi Investigate investigate Regarding the relationship Different Yoshida whether the whether the effects of Asian economies with for Asia? effects of sub- of sub-prime the US, the empirical Evidence prime financial financial crisis on evidence indicates three from Stock crisis on 13 13 Asian stark differences between Markets Asian economies are these two crises.

economies are similar to those of the previous crisis, by examining stock markets for volatility spillovers and causality directions between the US and Asia as well as for the degree of regional integration.

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Dynamic Christos relationshi Floros ps between Middle East stock markets

First, volatility spillovers in terms of correlation declined during the financial turmoil for some countries in both crises. This decline in correlation was more pervasive for the Asian crisis period. Second, a transition in correlation took place well in advance of the largest impact of September 2008 in the sub-prime financial crisis, while it occurred after July 1997 in Asian crisis. This result is indicative of market participants awareness of the upcoming stock market crash well before the collapse of government sponsored enterprises and investment banks. Third, the causality direction is influenced by the epicenter of the crisis. Significant effects of US Granger-causality are found for most of the Asian economies during the recent sub-prime financial crisis, while there are only a few cases in the Asian financial crisis. In addition, empirical evidence shows that regional integration was strengthened after the financial turmoil in the recent crisis. To examine the Daily data from the Empirical results confirm dynamic Egyptian(CMA) and that the Egyptian market relationships Israeli Tel Aviv plays a price discovery role, between Middle Stock implying that CMA prices East stock Exchange(TASEcontain useful information markets. 100)stockindicesar about TASE-100 prices. econsidered.Thepa CMA market is more peremploysaBivari informationally efficient atecointegration than TASE-100 market.

similar to those of the previous crisis, by examining stock markets for volatility spillovers and causality directions between the US and Asia as well as for the degree of regional integration.

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Financial market contagion evidence from the Asian crisis using a multivariat e GARCH Approach

Ahmed M. Khalid & Gulasekara n Rajguru

To investigate the spillover effects of the 1997 Asian financial crisis using data from a sample of selected Asian countries.

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Stock market integration: A multivariat e GARCH analysis on Poland and Hungary

Hong Li & Ewa Majerowsk a

To examines the linkages between the emerging stock markets in Warsaw and Budapest and the developed markets in Frankfurt and the U.S.

GARCH(1,1)modelt oexplainpricedisco veryandleadlagrelationshipsfort heperiodJuly1997 August2007. Used high frequency data (daily observations) on exchange rates from 1994 to 2002, construct a multivariate GARCH model and apply the Granger causality test to identify interlinkages among exchange rate markets in selected Asian countries. Samples split into three periods (precrisis, crisis and post-crisis) to verify if market linkages changed before and after the crisis By using a fourvariable asymmetric GARCH-BEKK model, Apart from the advantage of time-varying variances and covariances, the asymmetric BEKK model to be used in this study can examine the cross-market volatility spillover effects 2 and the asymmetric responses

Further, CMA index reflects new information faster than TASE 100 index.

The empirical evidence in this paper suggests that currency market linkages increased during and after the crisis. However, we found weak support for contagion in the pre-crisis period.

We find evidence of return and volatility spillovers from the developed to the emerging markets. We conclude that the two emerging markets in Central and Eastern Europe are linked to the developed markets in Frankfurt and the U.S. in terms of returns and volatility.

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The paradox of Chinas internation al stock market comovement Evidence from volatility spillover effects between China and G5 stock markets

Yusa ku Nishimura & Ming Men

To examine the daily and overnight volatility spillover effects in common stock prices between China and G5 countries and explain their implications on the basis of empirical results.

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The Ingyu Chiou volatility transmissio n of stock returns across Asia, Europe, and North America

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To investigate the lead-lag relationships between three major stock markets (Tokyo, London, and New York) over the period 1997-2007, using the return-volatility variable. The study aims to use new data to test how one national stock market affects another national stock market, which is one focus of the market integration literature. Can the US Yi-Jer To examine the stock Huang relationship market be & Frank W. between the US Shanghaied Bacon and China stock ? Evidence markets

The analysis utilizes the exponential generalize dauto regressive Conditional heteroskedasticity (EGARCH) model, the crosscorrelation function approach, and realized volatility for daily and intraday stock price data that cover the period from January5, 2004 to December31, 2007. The paper employs the traditional regression model because three stock markets (Tokyo, London, and New York) are indifferent time zones and trading takes place sequentially. Specifically, the intraday return is calculated from the daily open and close prices.

Principally, the paper concludes the following: strong evidence of shortrun one-way volatility spillover effects from China to the US, UK, German and French stock markets is observed and the test results indicate that Chinese investors were not rational and Chinas stock market entered a speculative bubble period after the second half of 2006.

This paper finds strong evidence that three stock markets are significantly interdependent: Tokyo leads London and New York; London leads New York and Tokyo; and New York leads Tokyo and London. In particular, the tie between London and New York is the strongest. Most of the authors results are consistent with those of previous studies.

To test for this relationship, the Morgan Stanley Capital International daily

The strength of the relationship between the US and China stock markets has significantly increased since 2005, may

of the impact of Chinas emerging stock market

between 2000 and 2007. This study attempts to categorize the event on February 27, 2007, i.e. 9 percent plunge in Shanghai stock market followed by the $1.5 trillion global market shakeout, as irrational, i.e. herd mentality

price index data was collected from April 15, 2002 to April 12, 2007. Daily Dow Jones Industrial Average (DJIA), Nikkei225 (Nikkei), HangSeng Index, and the Shanghai Stock Exchange Composite Index (SSECI) were collected from finance.yahoo.com from January 1, 2000 until April 3, 2007. The running beta and correlation coefficients, defined as the cumulative coefficients, are used to determine the co-movement of the SSECI and DJIA.

be attributed to Chinas policy change in 2005 to move toward a more free market economy. Because of the unique characteristics of Chinas stock market, it is hard to conclude that the $1.5trillion global market shake out was ignited by the 9percent plunge in the Shanghai stock market on February 27, 2007