Common trends and common cycles in stock markets

Paresh Kumar Narayan; Kannan S. Thuraisamy

doi:10.1016/j.econmod.2013.08.002

Common trends and common cycles in stock markets

Paresh Kumar Narayan, Kannan S. Thuraisamy

Research output: Contribution to journal › Article › Research › peer-review

8 Citations (Scopus)

Abstract

In this paper we examine the role of permanent and transitory shocks in explaining variations in the S&P 500, Dow Jones and the NASDAQ. Our modeling technique involves imposing both common trend and common cycle restrictions in extracting the variance decomposition of shocks. We find that: (1) the three stock price indices are characterized by a common trend and common cycle relationship; and (2) permanent shocks explain the bulk of the variations in stock prices over short horizons.

Original language	English
Pages (from-to)	472-476
Number of pages	5
Journal	Economic Modelling
Volume	35
DOIs	https://doi.org/10.1016/j.econmod.2013.08.002
Publication status	Published - Sept 2013
Externally published	Yes

Keywords

Permanent and transitory shocks
Stock prices
Trend-cycle decomposition

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10.1016/j.econmod.2013.08.002

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KW - Trend-cycle decomposition

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Common trends and common cycles in stock markets

Abstract

Keywords

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