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Convergence of Caribbean Stock Exchanges
Authors: Stacia Howard and Roland Craigwell
Outline of Presentation Rationale σ-convergence- Methodology- Results β-convergence- Methodology- Results Conclusion
Rationale
Chart 1: Returns of Caribbean Stock Markets (1999-2008)
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
%
BSE JSE TTSE
σ-convergence:Methodology
N
ititt yy
N 1
2loglog1
1
yi,t = the yield on asset i at time t
yt = the cross-section mean yield at time t.
y
Chart 2: σ-Convergence Results for Market Indices
0.0
0.20.4
0.60.8
1.01.2
1.41.6
1.8
Jan
-98
Jan
-00
Jan
-02
Jan
-04
Jan
-06
Jan
-08
BSE, JSE & TTSE
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan
-98
Jan
-00
Jan
-02
Jan
-04
Jan
-06
Jan
-08
BSE & TTSE
0.0
0.20.4
0.60.8
1.01.2
1.41.6
1.8
Jan
-98
Jan
-00
Jan
-02
Jan
-04
Jan
-06
Jan
-08
JSE & TTSE
0.0
0.51.0
1.52.0
2.53.0
3.54.0
4.5
Jan
-98
Jan
-00
Jan
-02
Jan
-04
Jan
-06
Jan
-08
BSE & JSE
Chart 3: σ-Convergence Results for Securities Cross-listed on the BSE & TTSE
0.0
0.5
1.0
1.5
2.0
2.5
May
-05
No
v-0
5
May
-06
No
v-0
6
May
-07
No
v-0
7
May
-08
No
v-0
8
BST
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
May
-05
No
v-0
5
May
-06
No
v-0
6
May
-07
No
v-0
7
May
-08
No
v-0
8
SFC
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
OCM
0.0
0.5
1.0
1.5
2.0
2.5
Dec-9
9
Dec-0
0
Dec-0
1
Dec-0
2
Dec-0
3
Dec-0
4
Dec-0
5
Dec-0
6
Dec-0
7
Dec-0
8
NML
0.0
0.10.2
0.30.4
0.50.6
0.70.8
0.9
May
-05
No
v-0
5
May
-06
No
v-0
6
May
-07
No
v-0
7
May
-08
No
v-0
8
FCIB
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Dec-0
5
Ap
r-0
6
Au
g-0
6
Dec-0
6
Ap
r-0
7
Au
g-0
7
Dec-0
7
Ap
r-0
8
Au
g-0
8
Dec-0
8
JMMB
0.0
0.5
1.0
1.5
2.0
2.5
May
-05
No
v-0
5
May
-06
No
v-0
6
May
-07
No
v-0
7
May
-08
No
v-0
8
GKC
0.0
0.51.0
1.52.0
2.53.0
3.54.0
4.5D
ec-9
9
Dec
-00
Dec
-01
Dec
-02
Dec
-03
Dec
-04
Dec
-05
Dec
-06
Dec
-07
Dec
-08
TCL
Chart 3: σ-Convergence Results for Securities Cross-listed on the BSE & TTSE
Chart 4: σ-Convergence Results for Securities Cross-listed on the JSE & TTSE
0.0
0.2
0.4
0.6
0.8
1.0
1.2
CCMB
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
DBG
0.0
0.5
1.0
1.5
2.0
2.5
3.0
May
-05
No
v-0
5
May
-06
No
v-0
6
May
-07
No
v-0
7
May
-08
No
v-0
8
GHL
0.00.20.40.60.81.01.21.41.61.82.0
NCBJ
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
RBTT
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
May
-05
No
v-0
5
May
-06
No
v-0
6
May
-07
No
v-0
7
May
-08
No
v-0
8
FCIB
0.0
0.5
1.0
1.5
2.0
2.5
3.0
May
-05
Nov
-05
May
-06
Nov
-06
May
-07
Nov
-07
May
-08
Nov
-08
JMMB
0.0
0.2
0.4
0.6
0.8
1.0
1.2
May
-05
Nov-
05
May
-06
Nov-
06
May
-07
Nov-
07
May
-08
Nov-
08
GKC
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Apr
-99
Apr
-00
Apr
-01
Apr
-02
Apr
-03
Apr
-04
Apr
-05
Apr
-06
Apr
-07
Apr
-08
TCL
Chart 4: σ-Convergence Results for Securities Cross-listed on the JSE & TTSE
Chart 5: σ-convergence Results for Securities Cross-listed on the BSE, JSE & TTSE
0.0
0.10.2
0.30.4
0.50.6
0.70.8
0.9
May
-05
No
v-0
5
May
-06
No
v-0
6
May
-07
No
v-0
7
May
-08
No
v-0
8
FCIB
0.00.20.40.60.81.01.21.41.61.82.0
No
v-0
5
Mar-
06
Jul-
06
No
v-0
6
Mar-
07
Jul-
07
No
v-0
7
Mar-
08
Jul-
08
No
v-0
8
JMMB
0.0
0.20.4
0.60.8
1.01.2
1.41.6
1.8
May
-05
No
v-0
5
May
-06
No
v-0
6
May
-07
No
v-0
7
May
-08
No
v-0
8
GKC
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Ap
r-9
9
Ap
r-0
0
Ap
r-0
1
Ap
r-0
2
Ap
r-0
3
Ap
r-0
4
Ap
r-0
5
Ap
r-0
6
Ap
r-0
7
Ap
r-0
8
TCL
β-convergence :Methodology
L
ltitiltiiti RRR
1,1,1,,
white-noise disturbance
iti ,
tiR ,return spread of cross listed securities or market indices between market i and the benchmark market at time t
difference operator
country-specific constant
β-convergence: ResultsUsing JSE as Benchmark Market
SECURITY TTSE BSE
Markets -0.956433 -1.023610
FCIB -1.163495 -1.447331
JMMB -1.329895 -0.869715
GKC -1.137638 -0.905985
TCL -0.996746 -1.037490
CCMB -0.997338
DBG -2.056688
GHL -1.326226
NCBJ -0.482185
RBTT -2.073634
β-convergence: ResultsUsing BSE as Benchmark Market
SECURITY TTSE JSE
Markets -1.097069 -1.023610
FCIB -1.027376 -1.447331
JMMB -1.063046 -0.869715
GKC -0.822799 -0.905985
TCL -1.255710 -1.037490
NML -0.940669
SFC -2.514112
OCM -0.939452
BST -1.409618
β-convergence: ResultsUsing TTSE as Benchmark MarketSECURITY
BSE SECURITY
JSE
Markets -1.097069
Markets -0.956433
FCIB -1.027376
FCIB -1.163495
JMMB -1.063046
JMMB -1.329895
GKC -0.822799
GKC -1.137638
TCL -1.255710
TCL -0.996746
NML -0.940669
CCMB -0.997638
SFC -2.514112
DBG -2.056688
OCM -0.939452
GHL -1.326226
BST -1.409618
NCBJ -0.482185
RBTT -2.051857
Conclusion Convergence at market level Some convergence at security
level, but findings not as conclusive
Information asymmetry probable Further work needed with weekly
values
Thank You!
