Co-movement of Stock Prices in the CARICOM Region

Transcript:Co-movement of Stock Prices in the CARICOM Region:
Co-movement of Stock Prices in the CARICOM Region John Cozier AND PATRICK WATSON Bbf5 confeRence May 2-3, 2013 Outline of Presentation Introduction Methodology and Data Empirical Analysis Preliminary Estimation of GARCH Estimation of Copula Conclusions Introduction Financial integration in the CARICOM Region Importance of stock price comovement Baur (2003) Stock price comovement in the literature Developed markets Kim and Langrin (CARICOM markets) Methodology and Data Preliminary Analysis Correlation coefficients January 1, 1998 – December 31, 2011 January 1, 1998 – March 31, 2008 April 1, 2008 – December 31, 2011 Sharpe Ratio GARCH-Copula Bollerslev (2008) Methodology and Data Data End of day values of the Composite Indices from January 1, 1998 – December 31, 2011 BSE JSE TTSE NYSE GARCH Copula: End of day values from April 1, 2008 – December 31, 2011 Figure 1 – Evolution of Composite Indices (1998-2011) Figure 2 - Evolution of Composite Indices (April 1, 2008-December 31, 2011) (April 1, 2008-December 31, 2011) Table 1 - Correlation Coefficients for the Composite Indices Figures 3 – 5: Scatterplots for the relationships between the CARICOM Composite Indices Figure 3 - TTSE/BSE Figure 4 - TTSE/JSE Figure 5 – JSE/BSE Figure 3 – BSE / TTSE Figure 4 – JSE / TTSE Figure 5 – BSE / JSE Figures 6 – 8: Scatterplots for the relationships between the CARICOM and NYSE Indices Figure 6 - BSE/NYSE Figure 7 - JSE/NYSE Figure 8 - TTSE/NYSE Figures 9 – 12: Daily Returns (January 1998 – December 2011) Figure 9 – BSE figure 10 - JSE Figure 11 - TTSE Figure 12 - NYSE Table 2 - Correlation Coefficients of the returns on BSE, JSE, TTSE and NYSE Table 3 - Summary Statistics of Daily Returns (April 2008 – December 2011) Empirical Analysis Empirical Analysis The β coefficient in the AR (1) – GJR (1, 1) model for the BSE (0.4852) was much lower in value less than its three counterparts (0.9347, 0.9285 and 0.9264) and it should be noted that the β for these remaining three was relatively similar to each other. The degrees of freedom parameter υ was equal to two for all the markets except the NYSE, where it was close to eight (7.9466). The parameter for asymmetry or skewness (λ) for the BSE and the NYSE showed negative skewness in the returns over the time period while the asymmetry parameter for the TTSE (0.1071) was much larger