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Cointegration and Causality Relationship of the USA Stock Market with Selected World Markets
Huseynova S. M., Gambarli U. A.

Huseynova, Sara Mubariz., and Gambarli, Uzeyir Azer. (2023) “Cointegration and Causality Relationship of the USA Stock Market with Selected World Markets.” Business Inform 12:128–134.
https://doi.org/10.32983/2222-4459-2023-12-128-134

Section: Economic and Mathematical Modeling

Article is written in English
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UDC 519.86

Abstract:
This article, based on data from 1995 to 2022, considers the commercial and economic processes between the USA, Japan and China and stock indexes indicators of these countries. In the course of research, the authors have created multiply regression model, adequacy of the model was determined using the Fisher’s F-test, Student’s t-test, and the stability of the parameters of the regression model was checked using the CUSUM test. Stationarity of the time series was checked by the Dickey-Fuller test. As a result, econometrically sound recommendations are developed, which allows to conduct dynamic analyses to effectively regulate economic processes, integration and international trade, foreign investment operations between the three countries. The Granger causality of the relationship was investigated. Johansen tests were implemented to find the cointegration space, after which a vector error correction model was constructed that describes the long-term equilibrium relationship between the studied indicators and the path to return to the equilibrium trajectory in case of deviation from it. During the modelling, all necessary statistical procedures were used to identify and evaluate the parameters of the model and check its adequacy, accuracy of short-term and long-term forecast values using Eviews 8 tools. The results show that not only for the countries studied here, but also for each country, conduction of monitoring by the governments by using the methodology of the vector model of error correction is very important in order to ensure effective regulation of foreign trade and to participate in regional and global integration processes.

Keywords: the USA, Japan, China, stock market, indexes, Nastaq_USA, NIKKEI_225_JAPAN, SHANGHAI_CHINA.

Fig.: 1. Tabl.: 8. Formulae: 4. Bibl.: 9.

Huseynova Sara Mubariz – Candidate of Sciences (Economics), Senior Lecturer, Department of Economics of International Relations, Baku State University (23 Academician Zahid Khalilova Str., Baku, Azerbaijan)
Email: [email protected]
Gambarli Uzeyir Azer – Student, Department of Economics of International Relations, Baku State University (23 Academician Zahid Khalilova Str., Baku, Azerbaijan)
Email: [email protected]

List of references in article

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The World Bank. https://www.worldbank.com

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