Stock exchange mergers and return co-movement: A flexible dynamic component correlations model

The creation of a common cross-border stock trading platform is found, by use of a Flexible Dynamic Component Correlations (FDCC) model, to have increased long-run trends in conditional correlations between foreign and domestic stock market returns. •Stock exchange mergers increase the long-run tren...

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Bibliographic Details
Published inEconomics letters Vol. 121; no. 3; pp. 511 - 515
Main Authors Hellström, Jörgen, Liu, Yuna, Sjögren, Tomas
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.12.2013
Elsevier Science Ltd
Subjects
Business Studies
C-GARCH
Correlation analysis
Economics
företagsekonomi
Long-run trend
nationalekonomi
Rates of return
Securities markets
Stochastic models
Stock exchanges
Studies
Time-varying correlation
Transitory component
C-GARCH
C22
Transitory component
C14
G12
Time-varying correlation
G15
Long-run trend
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Summary:The creation of a common cross-border stock trading platform is found, by use of a Flexible Dynamic Component Correlations (FDCC) model, to have increased long-run trends in conditional correlations between foreign and domestic stock market returns. •Stock exchange mergers increase the long-run trends in return correlations.•Short-run deviations approach the long-run trend in an oscillating manner.•Persistency in short-run deviations decreases due to stock exchange mergers.•The FDCC model captures successfully long- and short-run correlation components.
ISSN:0165-1765
1873-7374
1873-7374
DOI:10.1016/j.econlet.2013.10.001