Stock Market Synchronicity And The Global Trade Network: A Random-Walk Approach

Date Added: Oct 2009
Format: PDF

Do countries which are more centrally located in the global trade network have more synchronized stock markets? The people use global trade data to construct a novel measure of network position, Random Walk Between's Centrality (RWBC), that is especially well suited to this question. RWBC measures the extent to which a country lies on random pathways in-between countries and is therefore more likely to be a conduit in the random transmission of a shock across global markets. They use a panel dataset for 58 countries spanning the period 1990-2000 to find that a country's position in the world trade network as described by RWBC is associated with greater stock market synchronicity.