Document Type

Article

Publication Date

5-2014

DOI

10.5430/ijfr.v5n3p20

Publication Title

International Journal of Financial Research

Volume

5

Issue

3

Pages

20-42

Abstract

This study investigates the synchronization between stock markets in different countries. International stock markets tend to synchronize with one another in what appears to be an international financial cycle, yet trade and capital flows between the stock markets do not appear to be strong enough for one stock market to “drive” fluctuations in another stock market. Why are these weakly linked financial markets synchronized? This study suggests that global stock market synchronization results from a “mode-locking” phenomenon, a nonlinear process in which even a weak coupling between oscillating systems like stock markets tends to synchronize the fluctuations between the systems. Simulations, econometric analysis, and spectral analysis investigate this mode-locking hypothesis. Analysis reveals modest support for the mode-locking hypothesis of international stock market synchronization.

Original Publication Citation

Filer, L., & Selover, D. D. (2014). Why can weak linkages cause international stock market synchronization? The mode-locking effect. International Journal of Financial Research, 5(3), 20-42. doi:10.5430/ijfr.v5n3p20

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