Doctoral thesis of Philosophy: Empirical analysis of stock return synchronicity comparison of developed and emerging markets

Empirical Analysis of Stock Return Synchronicity: A Comparison of Developed and Emerging Markets

Author: Khandaker Tareq Mahmud Sarod

Field: Economics, Finance and Marketing

Document Summary:

This thesis examines stock market synchronicity across 34 emerging markets and compares the results with seven developed markets, utilizing weekly stock return data comprising approximately 20.8 million observations from 40,014 firms globally. The study explores stock synchronicity’s relationship with macroeconomic indicators, including rule of law, inflation, corruption, and geographical size, as proposed by Morck et al. (2000). It also incorporates a zero-return measure for synchronicity analysis, as suggested by Skaife et al. (2006), extending the analysis over a decade and incorporating a larger sample of shares and recent country-specific characteristics. The findings indicate that emerging economies exhibit higher stock market synchronicity compared to developed economies, with evidence of a statistically significant negative correlation between stock synchronicity and government accountability and corruption in emerging markets. The R-square measure reveals higher stock price co-movement in emerging economies, with a significant positive correlation between this measure and corruption and inflation, and a negative correlation with government accountability. Furthermore, civil law countries tend to show higher R-square measures than common law countries. The study also uses the zero-return measure, finding it higher in emerging economies, though with some inconsistencies for specific markets. The research suggests that emerging stock markets are more synchronous than developed markets, and common-law countries exhibit lower stock synchronicity compared to civil-law or post-communist countries.

Detailed Table of Contents:

• DECLARATION
• ACKNOWLEDGEMENTS
• TABLE OF CONTENTS
• LIST OF TABLES
• LIST OF FIGURES
• SUMMARY
• CHAPTER 1 Introduction
  • 1.1 History of the topic
  • 1.2 The importance of the topic
  • 1.3 Structure of the thesis
• CHAPTER 2 Literature review
  • 2.1 Synchronicity definition
  • 2.2 Synchronicity measures
    • 2.2.1 Classical synchronicity measure
    • 2.2.2 R-square measure
    • 2.2.3 Zero-return measure
  • 2.3 Recent literature
    • 2.3.1 Synchronicity and its determinants
    • 2.3.2 Co-movement across international markets
  • 2.4 Explanatory variables
    • 2.4.1 Corporate transparency and information disclosure
    • 2.4.2 Legal environment
    • 2.4.3 Country size
    • 2.4.4 Political connection
    • 2.4.5 Gross domestic product (GDP) per capita
    • 2.4.6 Corporate governance mechanisms
  • 2.5 Conclusion
• CHAPTER 3 Methodology and data
  • 3.1 Research methodology
    • 3.1.1 Measure One: Classical synchronicity measure
    • 3.1.2 Measure Two: R-square measure
    • 3.1.3 Measure Three: Zero-return measure
    • 3.1.4 Panel data
    • 3.1.5 ANOVA
    • 3.1.6 VAR
    • 3.1.7 Auto Correlation
  • 3.2 Sample Selections
  • 3.3 Stock synchronicity time series data
  • 3.4 Calculated data
    • 3.4.1 Classical Synchronicity Measure
    • 3.4.2 R-square measure
    • 3.4.3 Zero-return measure
  • 3.5 Stock synchronicity explanatory variables
    • 3.5.1 Corporate governance indicators
    • 3.5.2 Corruption perception index data
    • 3.5.3 GDP, inflation and geographical size data
  • 3.6 Trade openness
  • 3.7 Conclusion
• CHAPTER 4 Classical synchronicity measure
  • 4.1 Introduction
  • 4.2 Full period: Legal segment and geographical segment
  • 4.3 Sub-period: Legal and geographical segment
    • 4.3.1 Regional synchronicity time series links: A VAR analysis
  • 4.4 Panel data analysis
    • 4.4.1 The model
    • 4.4.2 Panel analysis
    • 4.4.3 Panel data analysis: Legal origin effects
  • 4.5 Discussion
  • 4.6 Conclusion
  • 4.7 Appendices
• CHAPTER 5 R-Square measure
  • 5.1 Introduction
  • 5.2 Full period: Legal and geographical segments
    • 5.2.1 Geographical segment
    • 5.2.2 Legal segment
  • 5.3 Sub-period: Legal and geographical segments
    • 5.3.1 Geographical segment
    • 5.3.2 Legal segment
  • 5.4 Panel data analysis
    • 5.4.1 The model
    • 5.4.2 Panel data analysis
    • 5.4.3 Legal origin effects
  • 5.5 Discussion
  • 5.6 Conclusion
  • 5.7 Appendices
• CHAPTER 6 Zero-return measure
  • 6.1 Introduction
  • 6.2 Zero-return measure: Full period data
    • 6.2.1 Geographical segment
    • 6.2.2 Legal segment
  • 6.3 Zero-return measure: Sub-period data
    • 6.3.1 Geographical segments
    • 6.3.2 Legal segment
  • 6.4 Panel data analysis
    • 6.4.1 The model
    • 6.4.2 Panel data analysis
    • 6.4.3 Legal origin effects
  • 6.5 Discussion
  • 6.6 Conclusion
  • 6.7 Appendices
• CHAPTER 7 Comparison of synchronicity measures
  • 7.1 Introduction
  • 7.2 Comparison
    • 7.2.1 Panel data comparison
    • 7.2.2 Correlation between synchronicity measures
  • 7.3 Discussion
• CHAPTER 8 Conclusion
  • 8.1 Introduction
  • 8.2 Summary of the thesis
  • 8.3 Key contributions of the thesis
    • 8.3.1 Time series analysis
    • 8.3.2 Panel data analysis
    • 8.3.3 Comparison between the synchronicity measures
  • 8.4 Limitations and directions for future research
• References