Abstract
It is a widely known fact in the world that global stock markets act as the main driving force for the evolution of stock markets in both developing and emerging markets. For instance, Pagan and Soydemir (2000) found evidence that US stock markets generated robust impacts on Latin American markets with pronounced effects noted in the case of Mexico. SEMDEX is no exception to this state of affairs. An analysis is made to gauge the effects of foreign stocks markets on SEMDEX based on the use of various econometric techniques such as granger causality, vector error correction models, variance decomposition and impulse response analyses. To sieve out any distinctive impacts both prior to and post the crisis, two specific time periods were used – namely, the pre-crisis period which spanned from January 2001 to January 2008. The post-crisis era occurred during the period February 2008 to January 2009. This latter is the final time period as the study was undertaken in the period January 2009. Nonetheless, the main objective is to bring to light how the crisis might have a significant impact on the performance of SEMDEX in just over one year. The following stock markets were considered for the analysis: DJIA, NASDAQ, FTSE, CAC-40, DAX, NIKKEI 225 and JSE. The ultimate aim of the analysis is to assess whether international portfolio diversification was subject to bearish forces once the crisis broke out. In fact, during crisis times, stock markets tend to co-move with stronger momentum relative to non-crisis periods so that the ability of investors to harness international portfolio diversification benefits is significantly being muted down.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Bibliography
Allen, D. C., & Macdonald, G. (1995). The long-run gains from international equity diversification: Australian evidence from cointegration tests. Applied Financial Economics, 5, 33–42.
Brooks, C. (2002). Introductory econometrics for finance. Cambridge/New York: Cambridge University Press.
Chowdhury, A. R. (1994). Stock market interdependencies: Evidence from the Asian NIEs. Journal of Macroeconomics, 16, 629–651.
Eun, C. S., & Shim, S. (1989). International transmission of stock market movements. Journal of Financial and Quantitative Analysis, 24, 241–256.
King, M. A., & Wadhwani, S. (1990). Transmission of volatility between stock markets. Review of Financial Studies, 3, 5–33.
Koch, P. D., & Koch, T. (1991). Evolution in dynamic linkages across daily national stock indexes. Journal of International Money and Finance, 10, 231–251.
Pagan, J. A., & Soydemir, G. (2000). On the linkages between equity markets in Latin America. Applied Economics Letters, 7, 207–210.
Ripley, D. M. (1973). Systematic elements in the linkage of national stock market indices. The Review of Economics and Statistics, 55(3), 356–361. MIT Press.
Roca, E. D. (1999). Short-term and long-term price linkages between the equity markets of Australia and its major trading partners. Applied Financial Economics, 9(5), 501–511. Taylor and Francis Journals.
Taylor, M. P., & Tonks, I. (1989). The internationalisation of stock markets and the abolition of U.K. Exchange Control. The Review of Economics and Statistics, 71(2), 332–336. MIT Press.
Author information
Authors and Affiliations
Appendix
Appendix
Rights and permissions
Copyright information
© 2017 The Author(s)
About this chapter
Cite this chapter
Ramlall, I. (2017). The Impact of US Subprime Crisis on SEMDEX. In: Economics and Finance in Mauritius. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-39435-0_6
Download citation
DOI: https://doi.org/10.1007/978-3-319-39435-0_6
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-319-39434-3
Online ISBN: 978-3-319-39435-0
eBook Packages: Economics and FinanceEconomics and Finance (R0)