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International Commodity Prices and the Australian Stock Market

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  • CHRIS HEATON
  • GEORGE MILUNOVICH
  • ANTHONY PASSÉ‐DE SILVA

Abstract

We propose a method for estimating the earliest time during the trading day when overnight information is reflected in domestic share prices, and use it to measure the impact of international commodities on four Australian Securities Exchange (ASX) indices. While evidence is found that the ASX opening price does not fully reflect overnight news, this information is absorbed within 15 min of the opening time. Using appropriately constructed returns, we find international commodities to have a statistically significant and economically meaningful effect on the ASX. Nevertheless, the S&P 500 index appears to be a more important contributor of relevant overnight information.

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File URL: http://hdl.handle.net/10.1111/j.1475-4932.2010.00686.x
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Bibliographic Info

Article provided by The Economic Society of Australia in its journal Economic Record.

Volume (Year): 87 (2011)
Issue (Month): 276 (March)
Pages: 37-44

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Handle: RePEc:bla:ecorec:v:87:y:2011:i:276:p:37-44

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Keywords: G14 ; G15 ; C52 ;

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  1. Becker, Kent G & Finnerty, Joseph E & Tucker, Alan L, 1992. "The Intraday Interdependence Structure between U.S. and Japanese Equity Markets," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 15(1), pages 27-37, Spring.
  2. K. Chaudhuri & S. Smiles, 2004. "Stock market and aggregate economic activity: evidence from Australia," Applied Financial Economics, Taylor & Francis Journals, vol. 14(2), pages 121-129.
  3. Fama, Eugene F & French, Kenneth R, 1987. "Commodity Futures Prices: Some Evidence on Forecast Power, Premiums,and the Theory of Storage," The Journal of Business, University of Chicago Press, vol. 60(1), pages 55-73, January.
  4. Baur, Dirk & Jung, Robert C., 2006. "Return and volatility linkages between the US and the German stock market," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 598-613, June.
  5. James G. MacKinnon & Halbert White, 1983. "Some Heteroskedasticity Consistent Covariance Matrix Estimators with Improved Finite Sample Properties," Working Papers 537, Queen's University, Department of Economics.
  6. Martens, Martin & Poon, Ser-Huang, 2001. "Returns synchronization and daily correlation dynamics between international stock markets," Journal of Banking & Finance, Elsevier, vol. 25(10), pages 1805-1827, October.
  7. Milunovich, George & Thorp, Susan, 2007. "Measuring equity market integration using uncorrelated information flows: Tokyo, London and New York," Journal of Multinational Financial Management, Elsevier, vol. 17(4), pages 275-289, October.
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