Cointegration and priority relationships between stock markets of Turkey, Brazil and Argentina

Abstract

The aim of this study is to expose the relationships between Istanbul (Turkey), Merval (Argentina) and Bovespa (Brazil) stock exchange markets using monthly data covering the period 1997:03 - 2007:06. The long term co-movement of the stock exchanges has been tested by cointegration test developed by Johansen (1998) and Johansen Juselius (1990). Besides, the priority relationships and direction of the relation among the variables have been examined by impulse-response functions and variance decomposition. A long run relationship has been detected between the stock markets as a conclusion. According to the variance decomposition results, Bovespa has a major effect on ISE. In addition to this, even Bovespa has also an effect on Merval, it itself is not affected by the other two stock exchanges.