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Table 4 VECM test results: correlation based international portfolios

From: Is a correlation-based investment strategy beneficial for long-term international portfolio investors?

 

Intercept

\({\Delta P}_{j,S1r-i,t-1}\)

\({\Delta P}_{j,S1r-i,t-2}\)

\({\Delta P}_{j,S1r-i,t-3}\)

\(\Delta {S\&P500}_{it-1}\)

\(\Delta {S\&P500}_{it-2}\)

\(\Delta {S\&P500}_{it-3}\)

\({\Delta Brent}_{it-1}\)

\({\Delta Brent}_{it-2}\)

\({\Delta Brent}_{it-3}\)

\({ECT}_{it-1}\)

Panel 1. LA

Blue

0.0005*

(0.0001)

− 0.0079

(0.0078)

− 0.0111

(0.0082)

0.0090

(0.0074)

0.0385*

(0.0110)

− 0.0238*

(0.0113)

0.0305*

(0.0110)

0.0110*

(0.0054)

− 0.0020

(0.0054)

0.0068

(0.0054)

0.0001*

(0.0000)

Purple

0.0007*

(0.0002)

− 0.0074

(0.0163)

− 0.0091

(0.0162)

0.0392*

(0.0158)

0.0364*

(0.0175)

− 0.0272

(0.0176)

0.0270

(0.0172)

0.0102

(0.0087)

− 0.0017

(0.0086)

0.0061

(0.0087)

− 0.0001*

(0.0000)

Green

0.0007*

(0.0001)

− 0.0031

(0.0053)

0.0013

(0.0050)

0.0084*

(0.0049)

0.0537*

(0.0097)

− 0.0461*

(0.0097)

0.0391*

(0.0095)

0.0070

(0.0048)

0.0047

(0.0048)

0.0600*

(0.0048)

− 0.0001*

(0.0000)

Red

0.0007*

(0.0001)

0.0005

(0.0029)

− 0.0021

(0.0029)

0.0048*

(0.0027)

0.0185*

(0.0035)

0.0244*

(0.0035)

0.0125*

(0.0035)

− 0.0001

(0.0001)

0.0001

(0.0001)

0.0002*

(0.0001)

− 0.0001*

(0.0000)

Panel 2. Asia

Blue

0.3417

(0.1751)

− 0.0039*

(0.0009)

0.0001

(0.0008)

− 0.0008

(0.0009)

0.6708*

(0.0118)

0.0488*

(0.0117)

0.0366*

(0.0116)

− 0.0421*

(0.0246)

− 0.0160

(0.0247)

–

0.8510*

(0.1929)

Purple

3.6916*

(0.2968)

− 0.0101*

(0.0021)

− 0.0001

(0.0021)

0.0004

(0.0021)

0.7301*

(0.0200)

0.2000*

(0.0199)

0.0494*

(0.0199)

− 0.0863*

(0.0401)

− 0.0183

(0.0398)

–

3.5056*

(0.2613)

Green

2.8158*

(0.1748)

− 0.0007

(0.0007)

− 0.0005

(0.0007)

− 0.0015*

(0.0008)

0.4361*

(0.0118)

0.2276*

(0.0117)

0.0255*

(0.0117)

− 0.0338

(0.0237)

− 0.0174

(0.0236)

–

2.8418*

(0.1517)

Red

1.7905*

(0.1302)

0.0075*

(0.0005)

0.0021*

(0.0005)

0.0007

(0.0005)

0.8525*

(0.0088)

0.5455*

(0.0088)

0.1385*

(0.0087)

− 0.0573*

(0.0180)

0.0819*

(0.0180)

–

1.5641*

(0.1033)

Panel 3. MENA

Blue

− 0.0001

(0.0000)

− 0.0007

(0.0025)

0.0011

(0.0024)

0.0038

(0.0024)

0.0002*

(0.0000)

0.0001*

(0.0000)

0.0001*

(0.0000)

0.0001

(0.0000)

0.0001

(0.0000)

–

− 0.0011*

(0.0003)

Purple

0.3195

(0.1387)

0.0022

(0.0009)

0.0019

(0.0009)

0.0014

(0.0009)

0.2587*

(0.0093)

0.1157*

(0.0093)

0.0723*

(0.0092)

0.1140*

(0.0195)

0.0426*

(0.0197)

–

0.0017

(0.0047)

Green

0.4716*

(0.1176)

0.0011*

(0.0005)

0.0005

(0.0004)

0.0013*

(0.0005)

0.3280*

(0.0080)

0.1050*

(0.0080)

0.0626*

(0.0079)

0.0696*

(0.0163)

0.0576*

(0.0164)

–

0.0521

(0.1030)

Red

0.4733*

(0.0493)

0.0014*

(0.0002)

0.0011*

(0.0002)

0.0004*

(0.0002)

0.2290*

(0.0334)

0.0831*

(0.0033)

0.0633*

(0.0033)

0.0463*

(0.0069)

0.0344*

(0.0069)

–

0.1202*

(0.0412)

Panel 4. CEE

Blue

0.3417

(0.1751)

− 0.0039*

(0.0009)

0.0001

(0.0008)

− 0.0008

(0.0009)

0.6708*

(0.0118)

0.0488*

(0.0117)

0.0366*

(0.0116)

− 0.0421*

(0.0246)

− 0.0160

(0.0247)

–

0.8510*

(0.1929)

Purple

3.6916*

(0.2968)

− 0.0101*

(0.0021)

− 0.0001

(0.0021)

0.0004

(0.0021)

0.7301*

(0.0200)

0.2000*

(0.0199)

0.0494*

(0.0199)

− 0.0863*

(0.0401)

− 0.0183

(0.0398)

–

3.5056*

(0.2613)

Green

2.8158*

(0.1748)

− 0.0007

(0.0007)

− 0.0005

(0.0007)

− 0.0015*

(0.0008)

0.4361*

(0.0118)

0.2276*

(0.0117)

0.0255*

(0.0117)

− 0.0338

(0.0237)

− 0.0174

(0.0236)

–

2.8418*

(0.1517)

Red

1.7905*

(0.1302)

0.0075*

(0.0005)

0.0021*

(0.0005)

0.0007

(0.0005)

0.8525*

(0.0088)

0.5455*

(0.0088)

0.1385*

(0.0087)

− 0.0573*

(0.0180)

0.0819*

(0.0180)

–

1.5641*

(0.1033)

  1. This table presents a VECM model for four emerging market groups. We only present model 3: \({\Delta P}_{i,r,t}={\delta }_{2i}+ {\theta }_{1i}{\sum }_{k=1}^{n}\Delta {P}_{j,r-i,t-k }+ {\theta }_{2i}{{\sum }_{k=1}^{n}{\Delta BRENT}_{it-k}+}{\theta }_{3i}{\sum }_{k=1}^{n}\Delta {S\&P500}_{it-k} {+{\delta }_{1i}{ECT}_{it-1}+\epsilon }_{it.}\) For the other models see Additional file 1: Tables S5-1 to S5-4. Here, \({\Delta P}_{i,r}\) is a vector of returns of emerging markets, i, in region r; \({\Delta P}_{j,r-i,t}\) (columns 4–6) is a vector of returns of j markets in the Blue-Red portfolios, excluding i. Blue portfolio captures correlation between (i) and (j) markets of 0.2 or lower; Purple portfolio captures correlation between 0.2 and 0.3; Green portfolio covers correlation between 0.4 and 0.5; the Red portfolio stock consists of correlations of 0.6 or more. \({Brent}_{it}\) is Brent oil price series; and \({S\&P500}_{it}\) is the price index of the US market. These variables appear in first differenced form, represented by \(\Delta\). \(\delta\) and \(\theta s\) are the parameters to be estimated. The error correction term (ECT), which is one lag of the residual from Eq. (1) if significant and negative, confirms a stable long-term relationship between the variables identified. The lag structure for the model is chosen by minimizing the Schwarz Information Criteria. Values in parenthesis are standard errors. * denotes level of significance at 5% or better
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