Abstract:

This dissertation contains three essays related to international stock market co-movement. The first essay explores whether emerging stock markets become more integrated with the world stock market overtime. Conditional time-varying correlations between the country's and the world stock returns are extracted from the multivariate factor model with time-varying volatility of country's stock returns. The finding suggests the co-movements of stock returns in most emerging markets and the world market had strengthened in which their correlations increased at faster pace particularly after financial crises.

The second essay examines a convergence among East Asian stock markets and depicts the pattern of stock market integration. The convergence is investigated through Johansen's maximum likelihood test for co-integration. Then, a variance decomposition technique is applied to characterize the source of variation in these markets. East Asian stock markets were mildly integrated in the early 1990s. The Asian financial crisis hastened the integration process. In the post-crisis period, the degree of intra-regional stock market integration accelerated, whereas the degree of global stock market integration remained significant.

The last essay explains the variation in the consequences of the U.S. housing crisis across countries. The level of country's vulnerability is measured by the crisis index of a concurrent downturn in stock market around the world since August 2007. Overall, there is an evidence that countries experienced a splash of liquidity in preceding periods were likely to be more prone to the crisis. Specifically, countries that had borrowed heavily on global capital markets to finance their spending were in for pain. Nevertheless, massive revenue windfalls and spillovers from increasing commodity prices helped cushion resource-rich countries and their trade-linked neighbors.