Financial Cointegration of Emerging Economies: Evidence from Bivariate Cointegration and Granger Causality
Journal Title: Empirical Economic Review - Year 2018, Vol 1, Issue 1
Abstract
The study at hand examined financial cointegration of emerging economies and explored the diversification opportunities which are available for investors of developed countries. For the long run and causal relationship, Johanson cointegration and Granger Causality test are employed respectively. Analysis revealed evidence of cointegration between the markets of UK and Egypt. Granger Causality test indicated causality and most emerging stock markets were detected to be the followers of established capital markets. Findings implied that investors should consider the cointegration relationship before making investment decisions as it can minimize potential paybacks of prospective international portfolio diversification. Further, policy makers are recommended to consider keep an eye on the stock markets which are strongly cointegrated also having high bilateral trade volume while framing fiscal and monetary policies.
Authors and Affiliations
Vina Javed Khan, Muhammad Saeed, Tello Oluwatoba Ibrahim
Keywords
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- EP ID EP402568
- DOI 10.29145/eer/11/010103
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