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Long-run equilibrium relationships in the international stock market factor systems

Title
Long-run equilibrium relationships in the international stock market factor systems
Authors
Choi, Hyung-Suk
Ewha Authors
최형석
SCOPUS Author ID
최형석scopus
Issue Date
2014
Journal Title
ZBORNIK RADOVA EKONOMSKOG FAKULTETA U RIJECI-PROCEEDINGS OF RIJEKA FACULTY OF ECONOMICS
ISSN
1331-8004JCR Link
Citation
vol. 32, no. 1, pp. 101 - 119
Keywords
International stock marketsglobal market integrationmulti-factor modelslong-run equilibriumcointegration
Publisher
UNIV RIJEKA, FAC ECOMOMICS
Indexed
SSCI; SCOPUS WOS scopus
Abstract
The main objective of this paper is to investigate the international linkages among local, country-specific stock market factors in order to better understand the dependence structure of increasingly integrated world financial markets. The seeming discordance between Fama and French (1998) and Griffin (2002) regarding the multi-factor model in the international stock markets motivates us to study the international relationship among local factors. With the individual stock data from the six major developed countries in the international stock market, we compose daily returns to the Fama-French three factors (i.e. market, size, and value) and the momentum factor over the period from January 2000 to June 2010. We investigate the international linkages among local stock market factors, focusing on their equilibrium relationship in the integrated world financial market. The cointegration analysis indicates that local factor indices, constructed from the cumulative factor returns, are cointegrated for each of the four factor classes. Thus, we conclude that local factors are globally bound to each other through a long-run equilibrium relationship and that although stock market factors may be local, rather than global, individual stock returns are driven by common global stochastic trends.
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경영대학 > 경영학전공 > Journal papers
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