- Repository URL:
- agricultural economics.; Major agricultural economics.
thesis / dissertation description
This thesis investigates the dynamic interdependence structure of nine national equity markets of the U.S., Canada, U.K, Germany, Switzerland, Italy, Belgium, Japan and Hong Kong during the post-Bretton Woods era, i.e., January 1, 1973 to February 28, 2003. Directed acyclic graphs (DAG) and vector-autoregression (VAR) analysis are employed to examine the dynamic structure of the nine markets. Unlike previous research studies, currency exchange risk is taken into account in the analysis. The findings show that individual currency movements can overstate or understate the stock market variations depending upon whether each individual currency is weakening or strengthening over time relative to the average currency. In order to stabilize the currency movements, we introduce the stable aggregate currency (SAC) into our study and use it to correctly measure the market variations. Innovation accounting techniques are applied to the contemporaneous structure of DAG and the SAC-based VAR analysis. The results show that the Japanese market is the most exogenous, whereas, the Canadian and Italian markets are the least exogenous among the nine markets. The U.S. and Swiss markets are mostly influenced by their own historical innovations. They are the only two markets that constantly have a strong impact on price movements in other major stock markets in the long run. The overall results show that the nine equity markets are highly interconnected.