Comovements in national stock markets

Gordon, Liam. (1997). Comovements in national stock markets Honours Thesis, School of Economics, The University of Queensland.

       
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Author Gordon, Liam.
Thesis Title Comovements in national stock markets
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 1997
Thesis type Honours Thesis
Total pages 76
Language eng
Subjects 14 Economics
Formatted abstract Mainstream economics has, for an extended period, neglected the stock market and its implications for investment, tending to focus on interest rates, and other perhaps more tangible factors, as bases for investment theory. This analysis reviews the growing literature on the impact of the stock market on the wider economy, with a specific focus on its relevance for comovements in national markets. Also reviewed are the new stock price theories and the efficient markets hypothesis, as well as relevant literature on international linkages. Particular focus is given to the business cycle synchronisation and capital market integration areas, due to a belief in their relevance for comovements. A solid theoretical discussion of the international links producing comovements in stock prices is not present in the literature, and this is a gap which this study aims to fill. This study also employs cointegration techniques, thereby overcoming a number of shortcomings in earlier comovement analyses, and in doing so it is found that a stable long run relationship exists between the US and Australian stock markets. It is hypothesised that this is due to a link in market sentiment, as a result of capital market integration, and linked underlying fundamentals, following business cycle synchronisation.

 
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