Stock market interdependence between Australia and its trading partners: does trade intensity matter?

Sudharshan Reddy Paramati (Lead / Corresponding author), Rakesh Gupta, Eduardo Roca

    Research output: Contribution to journalArticle

    6 Citations (Scopus)

    Abstract

    We investigate the extent and manner of stock market interdependence between Australia and its trading partners and examine whether this is affected by trade intensity. Based on trade intensity, we classify Australia’s trading partners into major, medium and minor partners. We hypothesize that markets with greater (lower) trade intensity will be more (less) interdependent with Australia. We perform correlation (unconditional and conditional) analyses between Australia and its trading partners. Our results indicate that most of the markets that are highly correlated with Australia are its major trading partners. We conduct panel regression analysis to investigate whether trade intensity has any impact on the stock market correlations between Australia and its trading partners. The results show that trade intensity significantly and positively affect the correlations of Australia with its major trading partners. Thus, the results confirm our hypothesis that trade intensity drives stock market interdependence between Australia and its trading partners.

    Original languageEnglish
    Pages (from-to)5303-5319
    Number of pages17
    JournalApplied Economics
    Volume47
    Issue number49
    Early online date15 May 2015
    DOIs
    Publication statusPublished - 21 Oct 2015

    Keywords

    • AGDCC-GARCH models
    • bilateral trade linkages
    • stock market interdependence

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