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International equity market integration: evidence from ETFs

International equity market integration: evidence from ETFs We examine international equity market integration using VAR-based rolling cointegration analysis and coefficients of the error correction terms. Applying different sizes of window for the rolling cointegration analysis, we reveal that 500-day (or less) windows might not be long enough to study the cointegration analysis and are more likely to have biased results. We also find three sub-periods showing relatively strong cointegrating relationships, but results for the rest of the sample periods display weak integration among international equity markets. Our findings from the error correction model show that major markets with greater coefficients are more efficient than markets with relatively smaller coefficients. Keywords: stock market integration; ETFs; exchange-traded funds; rolling cointegration analysis; international equity markets; error correction terms. Reference to this paper should be made as follows: Shin, S. and Oh, D-Y. (2015) `International equity market integration: evidence from ETFs', Int. J. Electronic Finance, Vol. 8, Nos. 2/3/4, pp.124­148. Biographical notes: Sangheon Shin is an Assistant Professor of Finance at Alabama State University. His research is focused on portfolio performance, market efficiency, capital asset pricing models and agency cost. Dong-Yop Oh is an Assistant Professor of Computer Information Systems and Quantitative Methods Department at the University of Texas http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Electronic Finance Inderscience Publishers

International equity market integration: evidence from ETFs

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Publisher
Inderscience Publishers
Copyright
Copyright © 2015 Inderscience Enterprises Ltd.
ISSN
1746-0069
eISSN
1746-0077
DOI
10.1504/IJEF.2015.070516
Publisher site
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Abstract

We examine international equity market integration using VAR-based rolling cointegration analysis and coefficients of the error correction terms. Applying different sizes of window for the rolling cointegration analysis, we reveal that 500-day (or less) windows might not be long enough to study the cointegration analysis and are more likely to have biased results. We also find three sub-periods showing relatively strong cointegrating relationships, but results for the rest of the sample periods display weak integration among international equity markets. Our findings from the error correction model show that major markets with greater coefficients are more efficient than markets with relatively smaller coefficients. Keywords: stock market integration; ETFs; exchange-traded funds; rolling cointegration analysis; international equity markets; error correction terms. Reference to this paper should be made as follows: Shin, S. and Oh, D-Y. (2015) `International equity market integration: evidence from ETFs', Int. J. Electronic Finance, Vol. 8, Nos. 2/3/4, pp.124­148. Biographical notes: Sangheon Shin is an Assistant Professor of Finance at Alabama State University. His research is focused on portfolio performance, market efficiency, capital asset pricing models and agency cost. Dong-Yop Oh is an Assistant Professor of Computer Information Systems and Quantitative Methods Department at the University of Texas

Journal

International Journal of Electronic Finance – Inderscience Publishers

Published: Jan 1, 2015

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