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2021, vol. 12, iss. 1, pp. 15-28
Interdependence of stock exchange indices from leading capital markets: USA, Germany and Japan Stock Market
Akademija strukovnih studija Južna Srbija, Odsek za poslovne studije Leskovac, Leskovac

emaildimitrijevic.ognjen@vpsle.edu.rs
Keywords: vector autoregressive model; cointegration; causality; stock exchange indices
Abstract
In the context of globalization, due to the accelerated process of economic integration of countries and financial markets, the interdependence of the world's leading financial markets is more than obvious. This paper investigates the interdependence of stock exchange indices from leading capital markets in the world: USA, European Union and Asia. Our intention is to determine the direction of causality between the observed capital markets, as well as whether and in what way shocks in one market are transmitted to other markets. Research methodology includes stationarity testing, the existence of cointegration, the application of the Vector Autoregressive Model (VAR) which is complemented by the Granger causality test and the Impulse Response Function (IRF) analysis. The results of the research are as follows. Johansen's cointegration test showed that there is no long-term equilibrium relationship between the observed markets, while Granger's test showed that there is mutual causality between the capital markets of Germany and the United States. As for the Japanese index, previous events in Germany and the United States are statistically significant, but previous events on the Tokyo Stock Exchange cannot explain movements in Germany and the United States. According to the results of the IRF analysis, shocks that may occur in the US market have an almost identical impact on all observed markets. On the other hand, disturbances on the Japanese market are not transmitted to the German and American market, i.e. remain in Japan.
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About

article language: Serbian
document type: Original Scientific Paper
DOI: 10.5937/bizinfo2101015M
received: 20/05/2021
accepted: 29/05/2021
published in SCIndeks: 23/07/2021
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