Asymmetric and nonlinear inter-relations of US stock indices
International Journal of Managerial Finance
ISSN: 1743-9132
Article publication date: 8 December 2017
Issue publication date: 7 February 2018
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
:Emerald Publishing Limited
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