What determines the dependence between stock markets - crisis or financial and economic fundamentals?

ABSTRACT

This paper investigates the economic and financial fundamentals that determine the dynamic linkage between Qatar and a set of selected international stock markets. To this end, we used different dynamic copula constructions to extract the series of time-varying degrees of dependence. Then, by estimating a quantile regression, we identified several economic and financial variables that significantly contribute to explaining the dynamic patterns of dependence among the studied stock markets. These include the returns of the Qatar stock market, crude oil prices, gold prices, the volatility of the S&P 500 index, and the world economic policy uncertainty index. The results obtained show that the fluctuations in these variables significantly influence the structure of dependence between the studied stock markets.

KEYWORDS:

• Crisis
• Stock markets
• Dependence
• Economic and financial fundamentals

JEL CLASSIFICATION:

• C13
• E44
• G15

Acknowledgements

Open Access funding provided by the Qatar National Library.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The policy uncertainty index is publicly available on https://www.policyuncertainty.com/

² Gaussian, Student’s t, Gumbel’s, Rotated Gumbel’s, Clayton’s, Rotated Clayton’s and Frank’s

³ Only the most relevant empirical results are reported in this article. Supplementary findings can be provided upon request.

⁴ All the results of the quantile regression can be provided upon request.

Additional information

Funding

This work was supported by the Qatar University [QUUG-CBE-DMM- 17/18-5].