Financial Market Integration Between Stock Market From North American Free Trade Agreement (NAFTA) Member

Yasir Maulana, Wely Hadi Gunawan

Abstract


Economic recession or crisis could show a higher possibility of financial crisis transmission in an integrated stock market. Integration between financial markets is a channel of spreading the devastating effects of the crisis. The objective of this study is to detect significant interactions among the stock markets of countries that are members of the North American Free Trade Agreement (NAFTA). NAFTA is a regional partnership with members from the United States, Canada and Mexico that are committed to reducing trade and investment barriers between member countries. The methodology of this research with VAR VECM model consists of three stages, the first analysis of the presence impact of the stock market index using the Granger Causality Test. Second, analyze the speed of response of an index to a change / shock in another index using the Impulse Response Function (IRF). The third stage analyzes the impact of changes / shocks from one index to other indices by using Variance Decomposition. From the 5 sets of stock market data for NAFTA countries, the results of the study show that there is only one cointegration. When viewed in the cointegration process of each of the two data series, cointegration occurs between the Nasdaq index with TSE and Nasdaq with MSE. Whereas TSE and MSE did not find any cointegration.

Keywords


Stock market, Cointegration

Full Text:

PDF

References


Bekaert, G., Harvey, C.R., & Ng, A. (2005). Market integration and contagion. Journal of Business, 78, 1–32.

Dickey, D.A., & Fuller, W.A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American statistical Association, 74 (366a), 427–431.

Dimpfl, Thomas. (2014). A note on cointegration of international stock market indices. International Review of Financial Analysis Vol. 33, Pages 10-16.

Dumitru-Cristian Oanea. 2015. Financial markets integration: A vector error-correction approach. The Journal of Economic Asymmetries 12 (2015) 153–161.

Engle, R.F., & Granger, C.W. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica: Journal of the Econometric Society, 55, 251–276.

Lee, Shie, F.S., & Chang, C.Y. (2012). How close a relationship does a capital market have with other such markets? The case of Taiwan from the Asian financial crisis. Pacific-Basin Finance Journal, 20 (3), 349–362.

Yang, F. (2012). A note on cointegration methodology in studying stock markets integration. Applied Economics Letters, 19 (16), 1583–1586.

Yang, L., Lee, C., & Shie, F.S. (2014). How close a relationship does a capital market have with other markets? A reexamination based on the equal variance test. Pacific-Basin Finance Journal, 26, 198–226.

Zhou, Xinmiao., Qiana, Huanhuan,. Pérez-Rodríguez, Jorge. V., López-Valcárcel, Beatriz González. Risk dependence and cointegration between pharmaceutical stock markets: The case of China and the USA. The North American Journal of Economics and Finance Vol. 52, 2020, 101175.




DOI: http://dx.doi.org/10.29040/jap.v21i02.1518

Refbacks

  • There are currently no refbacks.


Jurnal Akuntansi dan Pajak, ISSN 1412-629X l E-ISSN 2579-3055

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
web analytics