The Significance of Distance Between Stock Exchanges Undergoing the Process of Convergence: an Analysis of Selected World Stock Exchanges During the Period of 2004–2012

Abstract

A b s t r a c t. The paper concerns the convergence of selected world stock exchanges from the point of view of their development in the context of geographical and economic distance between them. It presents the methodological approach which points up the necessity of taking into account spatial and economic connections among stock markets in convergence analyses. The research includes 46 largest trading floors analyzed in the period of 2004-2012. The empirical data refer to six diagnostic variables acknowledged as the important determinants of the development of stock markets. K e y w o r d s: stock exchanges, convergence, physical and economic distance, connectivity matrix, spatial panel models. J E L Classification: C10, C12, C58, G15.

Spatio-temporal analysis of convergence of development level of selected stock exchanges in the period of 2004–2012

“…The earlier study (Szulc et al, 2014) found that the geographical distance has less impact on the process of equalizing differentiation of stock markets then the economic distance between them. In this study the finding was not revealed as clearly.…”

“…The same classes of models were used previously (Szulc et al, 2014).The premises for the application of spatial models are as follows: − The result of including the spatial linkages between stock exchanges in the models of their convergence is better evaluation of the convergence phenomenon on the grounds of β parameter estimated. The estimate of the parameter reflects more accurately the impact of the base level of development of a given stock exchange on the growth rate of the stock exchange characteristics in question because such estimate is not influenced by omitting spatial relationship.…”

“…It was recognized that, in the light of theory and empirical analyses, the specified variables are important determinants of the development of stock exchanges (see e.g. Demirgur-Kunt and Levine and Zelvos, 1996;Łuniewska and Tarczyński, 2006;Szulc et al, 2014;Wiśniewski, 2003). Taking into account the connections of the capital market with the economy of the country of its location was also an important issue for the specification of the diagnostic variables.…”

Review of Elżbieta Szulc and Dagna Wleklińska The Spatial-Temporal Analysis of the Connections of the Stock Markets Considering the Economic vs. Geographical Distance

“…The reviewed book is a spatio-temporal analysis of one of the most important issues of modern economics, which is the development of capital markets in the world and the links between them. The authors of the book have been dealing with this issue for many years and have a number of achievements in this respect (Szulc, Górna, and Wleklińska 2016;Wleklińska 2015, 2019;Szulc et al 2014). The discussed book is in a way both a summary and extension of a certain stage of their research.…”

The Share of European Economies in the Process of Convergence of Long-term Interest Rates in the EU in the Period of 2006–2016

“…(2012). The same classes of models, among others, were used in Szulc et al (2014) and Szulc, Wleklińska (2015). The matrix of an economic distance used in the analysis that comprises links that vary in time is a symmetric block diagonal matrix of the following form:…”