A network-based approach to study returns synchronization of stocks: The case of global equity markets
Fecha
2021-11-09
Profe guía
Perfil ORCID
Título de la revista
ISSN de la revista
Título del volumen
Editor
Hindawi
ISBN
ISSN
1099-0526
ISSNe
Resumen
The synchronization in financial markets has increased during the rise of global markets. Nevertheless, global shocks provoke high levels of returns synchronization that jeopardize market stability. Using correlation-based networks, regressions, and VAR models, we measure and estimate the effect of global synchronization on the world equity markets of North America, Latin America, Europe, Asia, and Oceania between July 2001 and April 2020. We find that our measure of global stock synchronization is dynamic over time, its minimums coincide with significant financial shocks, and it shrinks to its minimum levels, indicating that the returns of global markets are moving in a synchronized way. Also, it is a significant and positive factor of regional synchronization. Regional markets react heterogeneously to global synchronization shocks suggesting both local and global factors are sources of synchronization. Our work helps market participants who need to measure, monitor, and manage the synchronization of returns in a parsimonious, dynamic, and empirically tractable way. Our evidence highlights the necessity of including synchronization as a risk factor to assess the decision-making criteria of a broad range of market participants ranging from regulators to investors. To policy-makers, governments, and central banks, our work is a call to incorporate events of high global synchronization into the radar of hazards of the whole market stability.
Descripción
Lugar de Publicación
Sponsorship
Citación
Complexity, Vol. 2021, 7676457 (2021) p. 24
Palabras clave
Licencia
Atribución-NoComercial-CompartirIgual 3.0 Chile (CC BY-NC-SA 3.0 CL)