• The Impact of Political Uncertainty on the Financial Integration of Stock Markets

    Author(s):
    Eric Hayti (see profile)
    Date:
    2019
    Subject(s):
    International relations, International economic relations, Economics, Political science, Sentiment analysis, Mass media, Time-series analysis, Economic sanctions, Ukraine--Crimea, Russia
    Item Type:
    Thesis
    Institution:
    National Research University Higher School of Economics
    Permanent URL:
    https://doi.org/10.17613/d14q-wx81
    Abstract:
    In this paper we investigate how the annexation of Crimea by the Russian state affected the connection of Russian stock market with European and American ones using the novel media-based political uncertainly index. We gather Reuters news articles for the 10-year period and construct the time-series index of the political uncertainty using the sentiment analysis technics. We conduct the analyses under time varying frequencies. Firstly, we use novel CEEDMAN methodology (complete ensemble empirical mode decomposition with adaptive noise) to decompose stock indices into intrinsic mode functions (IMFs). Secondly, we calculate time-dependent intrinsic correlation (TDIC) between comparable IMFs to assess the dynamics of correlation between the markets over different time scales. Finally, we explain these changing financial integration (measured by TDICs) by our own news-based Russian Political Uncertainty Index (RPUI) via regression models. Main findings are firstly, that there is strong financial integration from Russia towards American and European stock markets, secondly, this integration dramatically decreased after the imposition of sanctions mainly on a large time scales and, finally, our RPU Index affects the dynamics of markets integration thereby confirming the hypotheses that the political instability explains the decrease in financial integration.
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    Status:
    Published
    Last Updated:
    7 months ago
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