Please use this identifier to cite or link to this item: http://ktisis.cut.ac.cy/handle/10488/5125
Title: Spillovers and correlations between US and major European stock markets: The role of the euro
Spillovers and correlations between US and major European stock markets: The role of the euro
Authors: Osborn, Denise R. 
Gill, Len 
Savva, Christos S. 
Osborn, Denise R. 
Gill, Len 
Keywords: Capital flow
Correlation
Currency market
European Monetary Union
Inflation
Market conditions
Market system
Price dynamics
Capital flow
Correlation
Currency market
European Monetary Union
Inflation
Market conditions
Market system
Price dynamics
Issue Date: 2009
Publisher: Taylor & Francis Group
Taylor & Francis Group
Source: Applied Financial Economics, 2009, Volume 19, Issue 19, Pages 1595-1604
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.
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.
URI: http://ktisis.cut.ac.cy/handle/10488/5125
http://ktisis.cut.ac.cy/handle/10488/5125
ISSN: 09603107
09603107
DOI: 10.1080/09603100802599563
10.1080/09603100802599563
Rights: © 2009 Taylor & Francis. All rights reserved.
� 2009 Taylor & Francis. All rights reserved.
Appears in Collections:Άρθρα/Articles

Show full item record

Page view(s) 50

1
checked on Dec 6, 2016

Google ScholarTM

Check

Altmetric


This item is licensed under a Creative Commons License Creative Commons