Short-term and Long-term Price Linkages between the Equity Markets of Australia and It's Major Trading Partners

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Roca, ED
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1999
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This paper investigates the price linkages between the equity market of Australia and that of the US, UK, Japan, Hong Kong, Singapore, Taiwan, and Korea using weekly MSCI stock market data covering the period 1974–1995. Cointegration test using the Johansen (Journal of Economic Dynamics and Control, 12, 1988) and Johansen and Juselius (Oxford Bulletin of Economics and Statistics, 52, 1990) procedure and Granger-causality tests based on error-correction models and standard vector autoregression models are conducted. No cointegration was found between Australia and the other markets. However, the Granger-causality and forecast variance decomposition analyses reveal that Australia is significantly linked with the US and the UK. The impulse response analyses further show that Australia responds to shocks from the US and the UK immediately during the first week and this response is completed with a period of four weeks.

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Applied Financial Economics
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Applied economics
Banking, finance and investment
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