Dynamic Inter-Linkages Among Equity Market in Select Emerging Econonmies-An Econometric Study

Abstract

The paper studies dynamic linkages among the equity markets of Mexico, Indonesia, Nigeria and Turkey (MINT) with an objective to investigate the correlations and causation among these markets. The authors have tested the time series for stationarity by applying the Augmented Dickey Fuller test and Phillip Peron test. Thereafter, uni-directional and bi-directional causality was tested using Granger Causality test. Finally, VAR framework was applied to study the response of each market to shocks in other markets. Based on various empirical tests conducted, it was found that Mexican and Indonesian markets show a bi-directional causality. VAR statistics showed that all markets display contemporaneous correlation with them and account for 99% of their variance. The study is useful from the perspective of both, investors and policy makers.