This paper aims to examine the short-run and long-run nonlinear dynamic relationship between indexes of construction and cement or steel in the Taiwan stock markets over the 1995- 2011 periods. In addition to traditional linear co-integration tests, the threshold co-integration and asymmetric threshold error-corrrection models (TECM) suggested by Enders and Siklos (2001) are used. Linear co-integration tests reveal no co-integration between the construction index and either of the cement and steel indexes, while threshold co-integration tests show existence of the co-integration relationship and asymmetric adjustment. Further analysis from TECM Granger causality tests finds evidence of a bi-directional causality between cement index and construction index, and a unidirectional causality going from steel index to construction index. These findings have important implications for the investors in the Taiwan stock markets

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