Stock Markets Comovements Among Emerging Economics

After the financial crises in 2008,the emerging economics show the huge growth potential and good development momentum,and become a source of world economic stability and a new engine of world economic growth,and there are stock markets comovements among emerging economics and international markets.On the one hand,there is higher degree of economic and financial integration in emerging economics.On the other hand,fluctuations in the stock market of one country will quickly pass to other countries and cause the same fluctuations in the stock market of other countries,which will lead to the spread of financial risks.Therefore,studying stock markets comovements among China and other emerging economics in the new era is of great theoretical and practical significance for forming a new pattern of multilateralism and preventing the systemic financial crisis.This paper sorts out the relevant literature around the stock markets comovements and summarize the theories of the comovements mechanism of stock market from the economic foundation hypothesis and the market contagion hypothesis,and analysis the spillover channels of volatility from trade spillover,financial spillover,and expected contagion.The VAR model and DCC-GARCH model which were established for the stock market returns between China and India,Brazil,South Africa,Russia,South Korea,Indonesia,Turkey,Argentina,Saudi Arabia,and Mexico is used to discuss the comovements of stock market return and volatility between emerging economics.This paper further explores the characteristics of the short-term stock market comovements in the new era such as the financial crisis period,the post-crisis period,the new normal of the global economy period,and the Belt and Road initiative period.The empirical analysis reached conclusions is as following.First,there is a weak stock markets comovements between China and other emerging economics.And the comovements are geographically aggregated and organization aggregated.The synergies in stock markets between China and India,Indonesia,South Korea,and Russia are closer.Under the unstable external environment,there are strong comovements between the stock markets in BRICS.Second,the financial crisis has a small impact on the stock markets comovements between emerging economics.Instead,it will reduce the volatility spillovers and risk transmission between the stock markets.Government interventions and regulations during crisis periods play an important role in reducing risk transmission.The de-globalization in crisis will play an important role in preventing the transnational transmission of financial risks.During the financial crisis,the comovements between the stock market returns of emerging economics have increased,and the comovements between volatility have weakened.Third,the stock markets comovements between emerging economics has gradually strengthened,the geographical agglomeration of the comovements have gradually weakened,and the synergistic change of comovements between stock markets has gradually been shown.After the new normal of global economy period,the structural differences in the stock markets comovements among emerging countries gradually disappeared,and the response of stock markets to external shocks began to converge.Therefore,emerging economics should strengthen the construction of stock market to improve the stock market effectiveness;further promote the opening up of financial market to increase its internationalization level;and create a new international cooperation mechanism to increase the degree of synergistic development of the stock market.At the same times,they should strengthen financial regulation and establish a coordinated regulatory governance mechanism.