Co-movement dynamics and disruptions of the major stock markets

We apply three approaches to investigate the evolution of the time varying (TV) multivariate
cointegration of the G7 stock markets from 1970 to 2022. Our work contributes
to the empirical literature on cointegration by illustrating the extent to which markets
equilibrium relations are fallen apart during periods of time. The evolution of the markets
interdependence is illustrated by investigating the instability and the strength of the
markets co-movement over time. We find that the growing globalization of the world
economies restrains markets segmentation during recent economic crises in particular the
global financial and the covid-19 crises. We also find that during the period 1980s the cointegration
of G7 stock markets is destabilized far more than during the following decades.
The growing China is found to negatively impact 7-variate cointegration of the G7 in the
recent decade whereas the 8-variate cointegration is strengthened. We also find that the
quadrivariate cointegration of the European stock markets becomes steady from the late
1990s to date.