A network visualization approach and global stock market integration

Abstract

This paper applies a visualized network approach to analyse the degree of integration or comovement among global equity markets. We utilize daily prices of stock market indices of 57 countries from January 1997 to August 2012 to establish both a minimum spanning tree network and graph network. We examine network features including connectivity and centrality through a variety of indicators. Our results clearly show that there has been a tendency over time for markets to become more integrated globally even during periods of market stress. The centrality results suggest that the U.S. and Hong Kong markets have been the most dominant markets in their geographic region. For Europe, we find 3 dominant centres, the United Kingdom, France, and Germany in contrast to previous literature suggesting that the United Kingdom was the dominant country. We further identify that Japan and Australia, instead of acting as dominant countries in their region, serve as bridging countries between the region and the rest of the world. Finally, we find that Africa does not form a cluster, and individual African countries tend to connect to other developed markets.

Integration in Central European capital markets in the context of the global COVID-19 pandemic

“…These conclusions have important implications for international investors, portfolio managers and regulatory authorities. Tong et al (2018) show that the results of centrality suggest that the US and Hong Kong markets have been the most dominant markets in their geographic region. For Europe, they find 3 dominant centres, France, the United Kingdom, and Germany, in contrast to the previous literature, which suggests that the United Kingdom was the dominant country.…”

“…The results of the study can be used to formulate efficient diversification strategies. Özer et al (2016), Tong et al (2018), Moagar-Poladian et al (2019) analyzed the interconnections between capital markets. Özer et al (2016) show hybrid results, failing to confirm the existence of interdependencies between the capital market of Germany, Austria, the Czech Republic, Croatia, Lithuania and Greece.…”

Equity market integration in emerging economies: a network visualization approach

“…For example, Hale et al (2013) found, connections slow during global financial crises. Tong et al (2018) mapped global stock market correlations. Daily stock market index values from 57 nations were used to create these graphs and trees.…”

“…The CC gauges an economy's linkages, while African countries like South Africa have fewer. Economists contend that endogenous characteristics rather than external links drive economic performance in Africa (Enisan and Olufisayo, 2009;King and Levine, 1993;Tong et al, 2018). This is because other African states are more widely scattered and geographically linked (especially to the European group).…”

“…In this regard, Tong et al (2018) created network models like MSTN and GN for developed countries. From 2013 to 2020, we study 24 emerging countries utilizing MSTN, GN, and connectivity indicators.…”