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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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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Abstract 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.
AbstractList 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.
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. [PUBLICATION ABSTRACT]
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.
Author Liu, Yuna
Sjögren, Tomas
Hellström, Jörgen
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  givenname: Tomas
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Cites_doi 10.1111/0022-1082.00137
10.1016/j.jeconom.2011.02.013
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10.1002/0471264105
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10.1016/j.iref.2011.09.005
10.1111/j.1540-6261.1993.tb05128.x
10.1257/aer.91.2.436
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Keywords C-GARCH
C22
Transitory component
C14
G12
Time-varying correlation
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Long-run trend
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SubjectTerms 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
Title Stock exchange mergers and return co-movement: A flexible dynamic component correlations model
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