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Does the Choice of Stock Market Synchronicity Measure Matter? Evidence from Developed and Emerging Countries

This paper analyses stock synchronicity measures proposed by Morck et al (2000), the classical measure and the R square measure. The Study finds evidence that stock markets of emerging economies are more synchronous than the developed economies using both the synchronicity measures. It is found that China, Malaysia and Turkey exhibit the highest stock synchronicity during the observation period. Further, cross-sectional analysis illustrates that inflation is generally positively correlated with stock synchronicity and government accountability and trade openness is generally negatively correlated with stock price co-movement, which is consistent with Morck et al (2000). Finally Pearson correlation coefficients and Spearman rank correlation coefficient show that the classical measure and the R square measure are positively correlated. The study concludes that the classical measure and the R square measure capture similar aspects of stock market synchronous behaviour.