Long-run relationships between international stock prices: further evidence from fractional cointegration tests

Marcel Aloy (1, 2) , Boutahar Mohamed (3) , Karine Gente (1, 2) , Anne Peguin-Feissolle (1)

1 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille
2 DEFI
3 IML - Institut de mathématiques de Luminy

The recent empirical literature supports the view that most of the international stock prices are not pairwise cointegrated. However, by using fractional cointegration techniques, this paper shows that France, Germany, Hong Kong, and Japan stock prices indices are pairwise fractionally cointegrated with US stock prices. Equilibrium errors are mean reverting with half-life lying between 2 and 12 days. It is worthwhile noting that emerging markets like Brazil and Argentina are not pairwise cointegrated with the US stock market. These new results have important implications for asset pricing and international portfolio strategy.

Mots clés: Social Sciences & Humanities

Domaines: Économie et finance quantitative [q-fin]

Marcel Aloy, Boutahar Mohamed, Karine Gente, Anne Peguin-Feissolle. Long-run relationships between international stock prices: further evidence from fractional cointegration tests. Applied Economics, 2013, 45 (07), pp.817-828. ⟨10.1080/00036846.2011.566207⟩. ⟨hal-00743767⟩