Time-Varying Correlations between JSE.JO Stock Market and Its Partners Using Symmetric and Asymmetric Dynamic Conditional Correlation Models
Round 1
Reviewer 1 Report
Comments and Suggestions for AuthorsThe manuscript explores the time-varying correlation and co-movement between the JSE.JO stock market of South Africa and its partners (developed and developing stock markets) using the Dynamic Conditional Correlation - Exponential Generalized Autoregressive Conditional Heteroscedasticity (DCC-EGARCH) methodology. The study employs different multivariate distributions to analyze the time-varying correlation and volatilities between the JSE.JO stock market and its partners. The authors find that the JSE.JO stock market is integrated and co-moves with its partners, with the conditional correlation for all markets exhibiting time-variant behavior. The manuscript is well-structured and addresses an important topic, but some sections need further clarification and elaboration. Specifically, the introduction, literature review, and discussion sections should be expanded to provide better context and practical implications. For example, the introduction provides a solid background on the importance of understanding stock market synchronization and the impact of economic interdependence on market correlations. However, it could be strengthened by explicitly stating the research questions or hypotheses at the end of the introduction. The literature review is comprehensive, covering various models and previous studies on stock market volatility and correlations. However, it would benefit from a clearer connection to the current study. Specifically, a paragraph summarizing how this study builds on or diverges from the cited literature would provide better context. Finally, the discussion is well-linked to the findings but could benefit from a more explicit connection to the practical implications for investors and policymakers. For instance, what specific strategies investors should consider based on these findings, or how policymakers can use this information to enhance market stability.
Author Response
Comments 1: The manuscript is well-structured and addresses an important topic, but some sections need further clarification and elaboration. Specifically, the introduction, literature review, and discussion sections should be expanded to provide better context and practical implications. For example, the introduction provides a solid background on the importance of understanding stock market synchronization and the impact of economic interdependence on market correlations. However, it could be strengthened by explicitly stating the research questions or hypotheses at the end of the introduction.
Response 1: Thank you for pointing this out. We agree with this comment. Therefore, we have added a paragraph to the introduction stating the research questions. You can find that on page 3, paragraph 7, and lines 97-101.
Comments 2: A paragraph summarizing how this study builds on or diverges from the cited literature would provide better context.
Response 2: Agree. We have, accordingly, included a paragraph to emphasize the difference and importance of this work. The difference from the cited works comes from employing both symmetric and asymmetric DCC models with different distributions for residuals and EGARCH models for univariate models while the importance of the study is because of shading lights to African stock markets and its effect in the global market. The paragraph, in the manuscript, is on P 5, lines 214-224.
Comments 3: Finally, the discussion is well-linked to the findings but could benefit from a more explicit connection to the practical implications for investors and policymakers.
Response 3: Great point. I have inserted a paragraph to indicate this point. Such point provides insights to investors to prepare for their investments by taking care of synchronization during global crises and help policymakers in enhancing market stability. The paragraph, in the manuscript, is on P 14, lines 464-470.
Author Response File: 
Author Response.pdf
Reviewer 2 Report
Comments and Suggestions for AuthorsReport on the Manuscript submitted to Stats Journal
Title: Time varying correlations between JSE.JO stock market and its partners using symmetric DCC models
Comments on the paper:
The paper presents an interesting econometric approach regarding the time varying correlations between five stock markets. The idea is to use DCC-GARCH and DCC-EGARCH estimations to analyze time-varying correlations and co-movements between these five stock markets. Results show that JSE.JO stock market is integrated and co-move with the selected partners in this paper. They also show the conditional correlations for all selected stock markets exhibit time-varying behavior. I can say that this paper has the potential to contribute to the field of literature interested in behavioral co-movements and dynamic correlations between stock markets. This work can be considered as an empirical contribution for the case of stock markets. Overall, this was an interesting and valuable paper that was a pleasure to read.
Nonetheless, I have the following minor comments that can be easily resolved.
1- When we read the title, we think that authors used only symmetric DCC models mentioned only but in the empirical analysis they used symmetric and asymmetric models. I think that title should be corrected
2- Add the structure of the paper in the last paragraph of the introduction and not in the literature review section.
3- Highlight clearly the contribution of the authors in this paper compared to the previous works in the field.
4- In table5 designed for the different estimations of the DCC models, we can notice that estimated parameter g is not significant then I think that it is useless to estimate asymmetric models or further refine the estimations.
5- Are you sure that all conditional correlations in figure4 page 11 are positive.
6- Can author integrate a dummy variable for the pandemic COVID-19 as we see a break in the conditional volatility figure 3 page 10.
7- The whole study needs proper proof-read regarding used language and grammar.
8- What about the policy implications that we can conclude from this work. Policy recommendations for the empirical results regarding time varying correlations between stock markets can be added in the conclusion.
Kind Regards,
Comments on the Quality of English LanguageThe whole study needs proper proof-read regarding used language and grammar.
Author Response
Comments 1: When we read the title, we think that authors used only symmetric DCC models mentioned only but in the empirical analysis they used symmetric and asymmetric models. I think that title should be corrected.
Response 1: Thank you for pointing this out. We agree with this comment. Therefore, we have modified the title by adding “and asymmetric” to it. You can find that in the manuscript on page 1, in the title as follows.
“Time-varying Correlations between JSE.JO Stock Market and its Partners Using Symmetric and Asymmetric DCC Models”
Comments 2: Add the structure of the paper in the last paragraph of the introduction and not in the literature review section.
Response 2: Agree. We have, accordingly, moved the paragraph from the literature review section to the introduction section. The paragraph, in the manuscript, is on P 3, lines 111-113.
Highlight clearly the contribution of the authors in this paper compared to the previous works in the field.
Response 3: We appreciate your indication of this important point and based on that we have included a paragraph that highlights this point. The contribution of this work comes from its reference to the importance and relation of African stock markets to the global markets. The paragraph, in the manuscript, is added on P 3, lines 105-110.
Comments 4: In table5 designed for the different estimations of the DCC models, we can notice that estimated parameter g is not significant then I think that it is useless to estimate asymmetric models or further refine the estimations.
Response 4: Crucial point. I have refined the models. Based on the results, the parameter g of the asymmetric DCC model with multivariate Laplace distribution is still insignificant, while the g of the asymmetric DCC model with Student-t distribution is significant and the model outperforms the other models and the remain findings are obtained based on it. Here, I would like to indicate that the model captures the asymmetry in the distribution of the returns series which is highlighted by the preliminary results. The modifications can be found on P 10, in Table 5.
Comments 5: Are you sure that all conditional correlations in Figure 4 page 11 are positive?
Response 5: yes, there is a plot shows each conditional correlation separately. The figure is added at the end of this file.
Comments 6: Can author integrate a dummy variable for the pandemic COVID-19 as we see a break in the conditional volatility Figure 3 page 10.
Response 6: Great. I consider this point as a future work with dividing the study period into three, pre-crisis, crisis, and post-crisis, periods. Please check P 14, lines 471-476.
Comments 7: The whole study needs proper proof-read regarding used language and grammar.
Response 7: It has been done by the second and third authors.
Comments 8: What about the policy implications that we can conclude from this work? Policy recommendations for the empirical results regarding time-varying correlations between stock markets can be added in the conclusion.
Response 8: Agree. I have, accordingly, included a paragraph to indicate this point. Such point provides insights to investors to prepare for their investments by taking care of synchronization during global crises and help policymakers in enhancing market stability. The paragraph, in the manuscript, is on P 14, lines 464-470.
Author Response File: Author Response.pdf
Reviewer 3 Report
Comments and Suggestions for AuthorsDear authors,
Thank you for the opportunity to review your manuscript.
I have several recommendations for you:
1. Depersonalize your research completely. Do not use "we" at all.
2. Introduction, literature review, discussion: 41 references are not enough to confirm your expertise in the field. At least 50 references are needed.
3. Methods: Describe the method's advantages and disadvantages based on relevant, similar studies.
4. The discussion part is a crucial part of the paper. A typical discussion is missing. Please add it, and it is not only necessary to enumerate the previous studies but also to highlight your outcomes when comparing similar studies.
5. Conclusion: Clearly state the limitations and future directions of the investigations in this part.
6. Introduction, literature review, or discussion: I think it might be a good idea to add these sources from emerging markets to your manuscript as well.
Valaskova, K., Gajdosikova, D., & Lazaroiu, G. (2023). Has the COVID-19 pandemic affected the corporate financial performance? A case study of Slovak enterprises . Equilibrium. Quarterly Journal of Economics and Economic Policy, 18(4), 1133–1178. https://doi.org/10.24136/eq.2023.036
Liu, J., Xie, X., Duan, Y., & Tang, L. (2023). Peer effects and the mechanisms in corporate capital structure: Evidence from Chinese listed firms. Oeconomia Copernicana, 14(1), 295– 326. https://doi.org/10.24136/oc.2023.008
Nagy, M., Valaskova, K., Kovalova, E., & Macura, M. (2024). Drivers of S&P 500’s Profitability: Implications for Investment Strategy and Risk Management. Economies, 12(4), 77. https://doi.org/10.3390/economies12040077
Author Response
Comments 1: Depersonalize your research completely. Do not use "we" at all.
Response 1: Thank you for pointing this out. We agree with this comment. Therefore, we have modified the paragraphs that contain “we”. You can notice the modifications on the following pages and lines
P 1, lines 4-6,
P 2, 81-82,
P 3, 122-128,
P 5, 209-210,
P 9, 348-349,
P 10, 355-356.
Comments 2: Introduction, literature review, discussion: 41 references are not enough to confirm your expertise in the field. At least 50 references are needed.
Response 2: Agree. I have, accordingly, reviewed and cited more works. Could you please check P 15-16, the references section?
Comments 3: Methods: Describe the method's advantages and disadvantages based on relevant, similar studies.
Response 3: Agree. We have, accordingly, included a paragraph to indicate this point. Such a point provides insights that let readers know how the advantages and disadvantages of the methods which help in choosing methods for their works. The paragraph, in the manuscript, is on P 6, lines 255-267.
Comments 4: The discussion part is a crucial part of the paper. A typical discussion is missing. Please add it, and it is not only necessary to enumerate the previous studies but also to highlight your outcomes when comparing similar studies.
Response 4: Thanks a lot for highlighting this point. Such point presents the importance of the work. Most of the result agreed with many studies’ findings and differed with others and the discussions added can be found on the following pages:
P 11, lines 408-417,
P 13, 423-427,
and P 14, 447-451.
Comments 5: Conclusion: Clearly state the limitations and future directions of the investigations in this part.
Response 5: Great point. The paragraph that highlights the limitations of the work is added and it could be found on P 14, lines 471-476.
Comments 6: Introduction, literature review, or discussion: I think it might be a good idea to add these sources from emerging markets to your manuscript as well.
Response 6: The comment is taken into account. We have, accordingly, checked the sources and the most related sources have been added. The addition of each source can be found on the pages that are indicated with each.
Valaskova, K., Gajdosikova, D., & Lazaroiu, G. (2023). Has the COVID-19 pandemic affected the corporate financial performance? A case study of Slovak enterprises . Equilibrium. Quarterly Journal of Economics and Economic Policy, 18(4), 1133–1178. https://doi.org/10.24136/eq.2023.036
Could you please check the following pages?
P 11, 408 and 412, and P 16, lines 583-584.
Liu, J., Xie, X., Duan, Y., & Tang, L. (2023). Peer effects and the mechanisms in corporate capital structure: Evidence from Chinese listed firms. Oeconomia Copernicana, 14(1), 295– 326. https://doi.org/10.24136/oc.2023.008
I think it is not much related. Because there is a difference between the concept of partner and peer and that is highlighted somehow in the source.
Nagy, M., Valaskova, K., Kovalova, E., & Macura, M. (2024). Drivers of S&P 500’s Profitability: Implications for Investment Strategy and Risk Management. Economies, 12(4), 77. https://doi.org/10.3390/economies12040077
P 11, line 413, and P 16, lines 590-591.
Author Response File: Author Response.pdf
Round 2
Reviewer 1 Report
Comments and Suggestions for AuthorsWell done.
