An Empirical Analysis of Nonlinear Dynamics Relationship between the United States and Taiwan Stock Markets

This paper investigates the co-integration and causal relationships by threshold model and non-linear adjustments relationship by STAR model between the U.S. and Taiwan stock market. The fi ndings indicate that there exists an asymmetric threshold co-integration relationship between the U.S. and Taiwan stock markets. Moreover, this paper further fi nds that this is signifi cant evidence of non-linearity in the TAIEX return, and the nonlinear dynamic adjustments of the S&P 500 and TAIEX prices follow the logistic transition function. The contribution of this study demonstrates that the LSTECM-GARCH is well suited to describing the short-run and long-run dynamic relationship between the U.S. and Taiwan stock markets.