Analysing correlation between the MSE index and global stock markets

Authors: R. Ellul

Corresponding: R. Ellul (ellulr@centralbankmalta.org)

Keywords: MGARCH, DCC, correlation, nancial in- tegration, stock indices, Malta stock exchange index (MSE)

Doi: http://dx.medra.org/10.7423/XJENZA.2015.2.08

Issue: Xjenza Online Vol. 3 Iss. 2 - December 2015

Abstract:
The paper investigates the time-varying cor- relation between the Malta Stock Exchange (MSE) in- dex, and ve major international stock markets. An MGARCH-DCC approach is employed to measure the degree to which the MSE moves with other stock mar- kets. Daily returns on these six stock exchange indices were computed and used to calculate dynamic condi- tional correlations (DCCs) between the markets. The results indicate that the local stock market appears not to be driven by the same forces that shape foreign stock markets, implying that local dynamics shape returns on the Exchange, rather than foreign events.

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