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Title: Spillovers and correlations between US and major European stock markets: The role of the euro
Authors: Osborn, Denise R.
Gill, Len
Savva, Christos S.
Scientific Field: Social Sciences
Scientific Field: Economics and Business
Subjects: Capital flow
Currency market
European Monetary Union
Market conditions
Market system
Price dynamics
Issue Date: 2009
Publisher: Taylor & Francis Group
Citation: Applied Financial Economics, 2009, Volume 19, Issue 19, Pages 1595-1604
Abstract: This article investigates the impact of the introduction of the euro on the interactions across the New York, London, Frankfurt and Paris stock markets. After controlling for possible returns and volatility spillovers, we focus on the correlations of shocks using the framework of Dynamic Conditional Correlations (DCC). Daily pseudo-closing prices (recorded at 16:00 London time) are used to avoid conflating correlation and spillover effects. Statistical break tests confirm that the introduction of the euro significantly affects the cross-market correlations. Although dynamic correlations of shocks between all market pairs increase, the correlation in the post-euro period is highest between Frankfurt and Paris, indicating increased integration of these markets. Other findings include the presence of spillover effects from foreign markets for both returns and volatilities, with asymmetries in volatilities and conditional correlations such that negative shocks have larger effects than positive ones.
Type: Article
ISSN: 09603107
Rights: © 2009 Taylor & Francis. All rights reserved.
Affiliation: Cyprus University of Technology
University of Cyprus
University of Manchester
Journal type: peer reviewed
Country: Cyprus
United Kingdom
Journal Type: Subscription
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