The Co-Movement between International and Emerging Stock Markets Using ANN and Stepwise Models: Evidence from Selected Indices

Abstract

In the past two decades, especially after the financial crisis of 2007–09, the literature for examining the availability of integration between the stock exchanges in developed and developing markets has grown. The importance of this topic stems from the significant implications of the linkage between exchange markets on various decisions taken by interested parties, such as policymakers and investors, in the decisions for portfolio diversification. This study examines the relationship between a developing stock exchange index, Amman Stock Exchange Index (ASEI), and the number of international indices, including S&P 500, NASDAQ, Nikkei, DAX, CAC, and HSI for 2008-2019. To validate the availability of the linkage between the indices, the author includes various tests of a correlation coefficient, stepwise regression analysis, and artificial neural network (ANN). Despite the results indicating that the ANN is more efficient than linear regression in investigating the availability of the relationship between ASEI and international indices, stepwise regression and neural network support this relationship. Furthermore, ANN results revealed that the S&P 500 index and year have the most substantial relationship with ASEI. Our research is theoretically and practically important; policymakers and investors can benefit from our findings. Future studies may explore the effect of different international stock market indices on ASEI or other developing markets. Further studies can use macroeconomic factors to build prediction models for stock market indices.

Iraqi Stock Exchange Reactions to the Oil price, Covid-19 Aftermath, and the Saudi Stock Exchange Movements pre-during Vaccination Program

“…The long-run results for a period before the Covid-19 vaccination process demonstrate that the Brent oil price per barrel (BOP), number of Covid-19 new infected cases (NIC_19), an ounce gold price (OGP) do not have a significant effect on the Iraq stock exchange index (ISX60), this result in somehow is consistent with (Ashraf, 2020;Kyriazis, 2021;Alkayed et al, 2022), but the Saudi Arabia stock index (MSCI30) and US dollar to Iraqi Dinar exchange rate (USD_IQD) have a significant positive effect on the Iraq stock exchange index (ISX60) at the 10% level, this results in line with (Youssef et al, 2021;Al-Najjar, 2022), meaning a 1% increase in (MSCI30, USD_IQD) respectively lead to a (44%, 29%) increase in ISX60 in the long-run, while the long-run results for the period during the Covid-19 vaccination process demonstrate that the Brent oil price per barrel (BOP), ounce gold price (OGP) has a significant negative effect, and the Saudi Arabia stock index (MSCI30) has a significant positive effect on the Iraq stock exchange index (ISX60) at the 5% level, this output strengthens the results of (Chien et al, 2021;Nwosa, 2021;Youssef et al, 2021;Al-Najjar, 2022;), meaning a 1% increase in (BOP, OGP) respectively lead to a (43%, 42%) adverse in ISX60 in long-run and a 1% increase in (MSCI30) lead to a (53%) increase in ISX60 in long-run, while the number of Covid-19 new infected cases (NIC_19) and US dollar to Iraqi Dinar exchange rate (USD_IQD) are insignificant with the Iraq stock exchange index (ISX60), this results similar in some way with (Ashraf, 2020;Chaudhry et al, 2021;Kumer, 2021;Alkayed et al, 2022).…”

“…In the last two decades, many studies tested the availability of linkage between the developed and developing stock markets (Al-Najjar, 2022). Many studies' results presented evidence of having interdependence and interactions among the regional or global stock market indicators (Komlavi, 2010;Patel, 2017;Meng and Huang, 2019;Jiang and Yoon, 2020;Hung, 2021;Matar et al, 2021), and during the global economic decline (Aloui and Hkiri, 2014;Shahzad et al, 2017), in general, Saudi Arabia constitutes the bulk of GCC market capitalization and predominates the activities of these country markets (Bley and Chen, 2006).…”

“…Furthermore, there is almost consensus among studies results during covid-19 that an increase rapidly in the number of covid-19 deaths led to a decline in financial assets value except for gold (Kyriazis, 2021). A number of studies found during the Covid-19 the relatedness and interdependence among the regional or global stock market indicators (Youssef et al, 2021;Al-Najjar, 2022), while a few studies' results indicated weak connectedness and inverse relationship between the local and the international equity markets even under the impact of the Covid-19 pandemic (Amewu et al, 2022;Das and Gupta, 2022). Not very many studies during the Covid-19 found a negative relationship between the currency exchange rate and the stock market (Syahri and Robiyanto, 2020;Nwosa, 2021), while no study mentioned any positive relationship between the exchange rate and stock market during the pandemic, but some indicated that there was no evidence of any interaction at all (Chaudhry et al, 2021;Kumar and Robiyanto, 2021).…”

Integrated Evaluation of Financial Risk in Coal Industry Restructuring: A Model of Linear Regression and PCA

“…e six independent variables in formula (1) can be calculated according to the financial statement data of listed companies. Financial crisis index W has no actual corresponding index in reality, so it is necessary to specify an alternative index [26][27][28][29][30][31]. After multiple weighing, the logistic function of the quick ratio is selected as the approximate alternative index of W, which is…”

Developing Machine Learning Techniques to Investigate the Impact of Air Quality Indices on Tadawul Exchange Index

“…. Research Methodologye research methodology is built after developing different nonlinear prediction models based on neural networks, support vector machines (SVM), Quick Unbiased Efficient Statistical Tree (QUEST), Tree-AS, random forest, CHAID, linear regression, generalized linear regression, and CR-Tree models[33][34][35][36]. After extensive study of previous work in the field, the models are considered to extract the most important prediction models in developing stock market prediction models.…”