Is being a super-power more important than being your close neighbour? A study of what moves the Australian stock market

Heng Chen, Russell Smyth*, Wing-Keung Wong

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    1 Citation (Scopus)
    10 Downloads (Pure)

    Abstract

    This article employs a Fractionally Integrated Vector Error Correction Model (FIVECM) to examine the return transmission between the Australian and New Zealand stock markets and the Australian and the United States stock markets. We augment the FIVECM with a multivariate GARCH model. In so doing, the first and second moments spill over between stock market indices are simultaneously revealed. Our empirical results suggest that the Australian stock market has stronger ties with the United States stock market than with the New Zealand stock market. We conclude that stock market movements in the United States, as the world's economic superpower, are more important to the Australian stock market than stock market movements in New Zealand, Australia's closest neighbour.

    Original languageEnglish
    Pages (from-to)733-747
    Number of pages15
    JournalApplied Financial Economics
    Volume18
    Issue number9
    DOIs
    Publication statusPublished - May 2008

    Scopus Subject Areas

    • Finance
    • Economics and Econometrics

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