Are prolonged conflict and tension deterrents for stock market integration? The case of Sri Lanka

Sriananthakumar, Sivagowry; Narayan, Seema

doi:10.1016/j.iref.2015.08.001

Cited by 11 publications

(7 citation statements)

References 38 publications

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“…First, currency fluctuations have caused the greatest changes in the structure of foreign direct investment in the EU (Driffield and Karoglou, 2016). A weaker British pound may harm global business (Cumming and Zahra, 2016), and therefore it is relevant for practitioners including international investors and portfolio managers to take into account how correlations in exchange rates change over time with regard to international asset allocation and risk management (Sriananthakumar and Narayan, 2015). Second, due to the high degree of uncertainty about Brexit and what the effects on the UK and Eurozone economies will be, understanding exchange rate co-movements may be useful for traders as they endeavor to adopt their trading rules successfully (Caporale et al, 2017).…”

Section: Introductionmentioning

confidence: 99%

Co-movements between the British pound, the euro and the Japanese yen: the Brexit impact

Álvarez‐Díez

Baixauli‐Soler

Belda‐Ruiz

2019

JES

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Purpose The purpose of this paper is to analyze the Brexit effect – pre-Brexit and post-Brexit referendum periods – on the co-movements between the British pound (GBP), the euro (EUR) and the yen (JPY) against the US dollar (USD). Design/methodology/approach To ascertain the asymmetric behavior of dynamic correlations, the authors use the dynamic conditional correlation (DCC) model, the asymmetric dynamic conditional correlation (A-DCC) model and the diagonal BEKK model assuming Gaussian and Student’s t distribution. Several dummy variables have been included in order to identify the main periods related to Brexit. Findings Findings show a negative impact of the pre-Brexit referendum period on the correlation between GBP and EUR, while there is no significant effect on GBP–JPY and EUR–JPY pairs. The loss of correlation in the GBP–EUR pairing has not recovered during the post-Brexit referendum period, which could be attributed to the uncertainty about the final impact of Brexit on British and Eurozone economies. Practical implications The loss of correlation in the GBP–EUR pair has important implications for individual investors, portfolio managers and traders with respect to hedging activities, international trading and investment strategies. Originality/value The results are the first to address how Brexit has impacted on the co-movements between exchange rates using different multivariate models that allow for correlations to change over time.

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Section: Introductionmentioning

confidence: 99%

Co-movements between the British pound, the euro and the Japanese yen: the Brexit impact

Álvarez‐Díez

Baixauli‐Soler

Belda‐Ruiz

2019

JES

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“…He finds that economic variables – income level, capital flow, trade and banking capital – in addition to non-economic variables – political risk, law and order and bureaucratic quality – are major determinants of stock market development of emerging economies. Sriananthakumar and Narayan (2015) look into the stock market interdependence between Sri Lanka and selected economies (China, India, Pakistan, Malaysia, USA, Singapore) in the context of long civil war. The results report that the Sri Lanka stock market is weakly integrated with the other stock markets in questions.…”

Section: Introductionmentioning

confidence: 99%

Financial instability, integration and volatility of emerging South Asian stock markets

Kumar

Dhankar

2017

SAJBS

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Purpose The purpose of this paper is to examine the short- and long-run spillover effect of international financial instability on emerging South Asian stock markets. The paper also investigates the financial integration regionally. Design/methodology/approach Granger causality test is used for short-run causal relations. Since results of preliminary test highlight the significant autocorrelations in stock returns, GARCH class models with extreme shocks in international financial market are utilized to test the long-run spillover impact on stock returns. Findings Results indicate significant short- and long-run spillover impacts of international financial instability on the stock returns. They highlight the significant co-integration of South Asian stock markets with the international market. Significant correlations in stock returns and volatility reveal the degree of regional integration to be high between India, Pakistan and Sri Lanka. Research limitations/implications Business, political and market conditions of South Asian stock markets are fundamentally different from each other. These economies were liberalized at different time, which in turn may affect the degree of integration with international equity markets and regionally alike. Practical implications Financial liberalization has linked the South Asian stock markets to the rest of the world. Stock prices move in the same line with the emergence of global expected and unexpected economic shocks. The benefits that arise from the diversification of funds will be eradicated in the long run. Investors with long investment horizons will not actually benefit from portfolio diversification in South Asian equity markets. The Bangladesh stock market does not respond to volatility in international market in the short run and may be a good destination for short-term investment. Originality/value Pioneer efforts are made by utilizing a novel approach with the use of net volatility change in world financial instability for measuring the short- and long-run impacts. Given the emergence of South Asian stock markets, new insights into their vulnerability to world financial shocks provide interesting findings for portfolio diversification.

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“…Asia Sriananthakumar and Narayan (2015), Lean and Teng (2013), Narayan et al (2014), Qian andDiaz (2017), andBudd (2018) are among those who have study stock market integration in the Asian region using the DCC family of models. Sriananthakumar and Narayan (2015) investigate short-term stock market integration with monthly indices for the period 1993 to 2013 between Sri Lanka and selected economies, including India, China, Malaysia, Pakistan, Singapore, and the United States (US). Their findings reveal that Sri Lanka had low correlations with all these nations other than China, for which the correlation was the largest.…”

Section: Literature Reviewmentioning

confidence: 99%

Diversification Gains for a Home Biased Trader in the Emerging and Frontier Equity Markets

Narayan¹,

Srianathakumar²,

Maheshwari

et al. 2021

BEMP

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We study the case of a home-biased equity trader based in Asia, Central and Eastern Europe, the Middle East and North Africa, or Latin America, who is looking at diversifying his/her investment risks internationally within his/her region and three other emerging/frontier regions. We focus on explaining the dynamic conditional correlations between equity markets from 3 January 2002 to 11 November 2016. Timevarying opportunities for diversification are found in several nations across regions. However, diversification opportunities outside a region are largely reserved for bad times, such as during the global financial crisis and the European sovereign debt crisis.

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Are prolonged conflict and tension deterrents for stock market integration? The case of Sri Lanka

Cited by 11 publications

References 38 publications

Co-movements between the British pound, the euro and the Japanese yen: the Brexit impact

Co-movements between the British pound, the euro and the Japanese yen: the Brexit impact

Financial instability, integration and volatility of emerging South Asian stock markets

Diversification Gains for a Home Biased Trader in the Emerging and Frontier Equity Markets

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