CORRELATION ANALYSIS OF THE DYNAMICS OF UKRAINIAN AND WORLD STOCK INDICES

Abstract

Globalization processes spread to all spheres of human life, affect the economies of each country in the world, and determine the ever-increasing interconnection of the stock markets of different countries. Stock price dynamics are interconnected in different markets in different way. In the context of current events at the world stock exchanges, the study of the relationship of stock markets of different countries seems quite relevant. The article investigates the relationship of the Ukrainian stock market with the stock markets of the world. From our opinion, the level of stock market development is an important aspect to consider when exploring the interconnections of stock markets in countries around the world. On the base of correlation analysis, we determined the strength of the interconnection of the dynamics of stock indices of the countries depending on the level of development of their stock markets. It is proved that the less developed are the stock markets, the less the growth of their stock indices correlates with the global trends and the growth of stock indices of the developed markets. The stock index of the “frontier” stock markets (MSCI Frontier Index) and the stock index of Ukraine (PFTS Index) have slightly higher correlation coefficients with the stock index of emerging markets (MSCI EM Index) than with the world index (MSCI ACWI) and developed markets index (MSCI World). At the same time, the correlation of the PFTS index with all groups of markets is very weak, and at all insignificant with the MSCI Frontier Index. This result may deal, in particular, with high volatility of the Ukrainian stock market. The level of correlation of MSCI Frontier Index with other groups of markets is slightly higher, than of PFTS. However, correlation of “frontier” stock markets with the world is also weak. A correlation analysis of the dynamics of the PFTS Index and the stock indices of countries such as the USA (S&P 500), Germany (DAX), Poland (WIG), China (SSEC) and Romania (BET), which have different levels of stock market development, confirmed the findings, obtained from the analysis of MSCI indices.