THE STUDY OF GLOBAL STOCK MARKET RELATIONSHIP IN G20 MAJOR ECONOMIES GROUP

Abstract

The opinion from some studies confirm in the context of increasing globalizing and increasing opportunities to the investors to invest abroad, it is essential for the international portfolio investors/whoever who intend or currently invest in abroad or domestic be concern of the relationship among the stock markets globally especially to influential countries. G20 members represent almost 90% of global GDP, 80% of international global-trade, 64% of the world’s population lives in G20 member countries, 84% of all fossil fuel emissions are produced by G20 countries. So that based on the fact above G20 member can be assumes as influential countries and has economic force toward each other even outside the G20. The Study was done to examine the causal relationship among equity markets in G20 to better understand how movements in one market are transmitted to other markets. The study was done by taking stock price data from May 2007 to till August 2012 of one of the stock market index that usually used as a benchmark of the stock market in each country. The granger causality reveals that by the number of causality relationship (both affected and affecting) the most integrated stock market is held by Saudi Arabia (84%/16 countries), Mexico (68%/13 countries) and South Africa (63%/12 countries). Then based on the number of the dependent stock markets is held by China (53%/10 countries), South Africa (47%/9 countries), and Russia (37%/7 countries). It’s also means that China, South Africa and Russia have the most influential stock markets in G20. By the number of affected by other stock market is held by Saudi Arabia (74%/14 countries), Mexico (63%/12 countries), and South Africa (37%/7 countries). This also means that Saudi Arabia, Mexico and South Africa have the most volatile stock market by the number of the dependency to other stock market in G20. Additionally this research also reveals that United Kingdom and India has independent stock markets toward other member of G20. On the other hand the research also shows that Argentina has a dependent stock market toward other member in G20.