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Asymmetric and nonlinear inter-relations of US stock indices

Dimitrios Vortelinos (Lincoln International Business School, University of Lincoln, Lincoln, UK)
Konstantinos Gkillas (Gillas) (Department of Business Administration, University of Patras, Patras, Greece)
Costas Syriopoulos (College of Business, Zayed University, Abu Dhabi, UAE)
Argyro Svingou (Department of Business Administration, University of Patras, Patras, Greece)

International Journal of Managerial Finance

ISSN: 1743-9132

Article publication date: 8 December 2017

Issue publication date: 7 February 2018

435

Abstract

Purpose

The purpose of this paper is to examine the inter-relations among the US stock indices.

Design/methodology/approach

Data of nine US stock indices spanning a period of sixteen years (2000-2015) are employed for this purpose. Asymmetries are examined via an error correction model. Non-linear inter-relations are researched via Breitung’s nonlinear cointegration, a M-G nonlinear causality model, shocks to the forecast error variance, a shock spillover index and an asymmetric VAR-GARCH (VAR-ABEKK) approach.

Findings

The inter-relations are significant. The results are robust across all types of inter-relations. They are highest in the Lehman Brothers sub-period. Higher stability after the EU debt crisis, enhances independence and growth for the US stock indices.

Originality/value

To the best of the knowledge, this is the first study to examine the inter-relations of US stock indices. Most studies on inter-relations concentrate on the portfolio analysis to reveal diversification benefits among various asset markets internationally. Hence this study contributes to this literature on the inter-relations of a specific asset market (stock), and in a specific nation (USA). The evident inter-relations support the notion of diversification benefits in the US stock markets.

Keywords

Citation

Vortelinos, D., Gkillas (Gillas), K., Syriopoulos, C. and Svingou, A. (2018), "Asymmetric and nonlinear inter-relations of US stock indices", International Journal of Managerial Finance, Vol. 14 No. 1, pp. 78-129. https://doi.org/10.1108/IJMF-02-2017-0018

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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