Abstract
After more than 10 years since the establishment of the Shanghai Cooperation Organization (SCO), this paper studies how variances and correlations have evolved in four SCO countries’ equity markets (China, Kazakhstan, Mongolia, and Russia) relative to Japanese, US and EU markets. We focus on the Mongolian equity market. We trace stock market co-movements of Mongolia and SCO member countries to the world market since the inauguration of the SCO in 2001. We also take into account the effects of recent world financial crisis in the region. As compared to the increasing global trend of market integration among countries, we don’t find any significant contagion among SCO countries in the first half of sample periods. After 2005, market integrations among SCO countries are evident.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Aielli, G.P., 2011. Dynamic conditional correlation: On properties and estimation, SSRN Paper No. 1507743. [online] Available at SSRN: http://ssrn.com/abstract=1507743 [Accessed 20 April 2012].
Ang, A., and Bekaert, G., 2002. International asset allocation with regime shifts. Review of Financial Studies, 15(4), pp.1137–1187.
Bollerslev, T., 1990. Modeling the coherence in short run nominal exchange rates: A multivariate generalized ARCH model. The Review of Economic and Statistics, 72(3), pp.498–505.
Cappiello, L., Engle, R.F., and Sheppard, K., 2006. Asymmetric dynamics in the correlations of global equity and bond returns. Journal of Financial Econometrics, 4(4), pp.537–572.
Das, S., and Uppal, R., 2004. Systemic risk and international portfolio choice. Journal of Finance, 59(6), pp.2809–2834.
De Santis, G., and Gerard, B., 1997. International asset pricing and portfolio diversification with time-varying risk. Journal of Finance, 52(5), pp.1881–1912.
Dorligsuren, D. and Bolormaa, J., 2005. Securities market development in Mongolia. In: OECD, Securities market in Eurasia. Ch.9. Paris: OECD Publishing
Engle, R., 2002. A dynamic conditional correlation: A simple class of multivariate generalized autoregressive conditional heteroskedasticity models. Journal of Business and Economic Statistics, 20(3), pp.339–350.
Erb, C., Harvey, C.R., and Viskanta, T., 1994. National risk and global fixed income allocation. Journal of Fixed Income, 4(2), pp.17–26.
Glosten, L., Jagannathan, R., and Runkle, D., 1993. On the relationship between the expected value and the volatility of the nominal excess return on stocks. Journal of Finance, 48(5), pp.1179–1801.
Golub, G.H., and van Loan, C.F., 1990. Matrix computations. 2nd Edition. Baltimore: John Hopkins University Press.
Gordon, M., 1962. The investment, financing, and valuation of the corporation. Homewood, IL: Irwin.
Lin, K.-P., Menkveld, A.J., and Yang, Z., 2009. Chinese and world equity markets: A review of volatilities and correlations in the first fifteen years. China Economic Review, 20(1), pp.29–45.
Longin, F., and Solnik, B., 2001. Extreme correlation of international equity markets. Journal of Finance, 56(2), pp.649–676.
Lucey, B.M., and Voronkova, S., 2008. Russian equity market linkages before and after the 1998 crisis: Evidence from stochastic and regime-switching cointegration tests. Journal of International Money and Finance, 27(8), pp.1303–1324.
MSE, 2010. Annual report 2009–2010. [pdf] Available at: http://mse.mn/doc/factbook/fact%20book%202010.pdf/ [Accessed 10 April 2012].
Palandri, A., 2009. Sequential conditional correlations: Inference and evaluation. Journal of Econometrics, 153(2), pp.122–132.
Patton, A.J., 2006. Modeling asymmetric exchange rate dependence. International Economic Review, 47(2), pp.527–556.
Shinozaki, S., 2005. Potential for securities markets in the Central Asian Countries, Azerbaijan and Mongolia. In: OECD, 2005. Securities market in Eurasia. Ch.2. Paris: OECD Publishing.
Tse, Y.K. and Tsui, K.C., 2002. A multivariate generalized autoregressive conditional heteroskedasticity model with time-varying correlation. Journal of Business and Economic Statistics, 20(2), pp.351–362.
Author information
Authors and Affiliations
Corresponding author
Additional information
The earlier version was presented at the 2012 Conference of Eurasian Business and Economic Society on May 24–26, 2012 in Istanbul, Turkey. The authors gratefully acknowledge for the comments from the Conference participants and for careful and constructive comments from three anonymous referees of this Journal. In addition, the authors would like to thank the Mongolian Stock Exchange (MSE) for providing the unpublished top 20-composite exchange data series for this study. The usual disclaimer applies and the authors are responsible for any remaining errors and discrepancies.
Rights and permissions
About this article
Cite this article
Tanai, Y., Lin, KP. Mongolian and World Equity Markets: Volatilities and Correlations. Eurasian Econ Rev 3, 136–164 (2013). https://doi.org/10.14208/eer.2013.03.02.003
Published:
Issue Date:
DOI: https://doi.org/10.14208/eer.2013.03.02.003