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Stock Market Integration and the Speed of Information Transmission

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Abstract

Using a unique dataset covering two years of high frequency data on the indices from markets in the U. S., London, Frankfurt, Paris, Warsaw, Prague, and Budapest, we perform cointegration and Granger causality tests with data of different frequencies (from 5 minutes to 1 day). The aim is to describe the time structure in which markets react to the information revealed in prices on other markets. The results suggest that the speed of information transmission is very fast. In all cases the strongest reaction occurs within 1 hour. Therefore, the use of daily data may be misleading when analyzing the issues of stock market integration and information transmission between markets.

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Article provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.

Volume (Year): 58 (2008)
Issue (Month): 01-02 (January)
Pages: 2-20

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Handle: RePEc:fau:fauart:v:58:y:2008:i:1-2:p:2-20

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Keywords: stock market integration; market comovement; intra-day data; speed of information transmission; cointegration; Granger causality;

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Cited by:
  1. repec:wdi:papers:2011-1028 is not listed on IDEAS
  2. Roman Horvath & Dragan Petrovski, 2012. "International Stock Market Integration : Central and South Eastern Europe Compared," Working Papers 317, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  3. Horobet, Alexandra & Ilie, Livia, 2007. "On the dynamic link between stock prices and exchange rates: evidence from Romania," MPRA Paper 6429, University Library of Munich, Germany.
  4. Dragan Tevdovski, 2014. "Extreme negative coexceedances in South Eastern European stock markets," CREATES Research Papers 2014-18, School of Economics and Management, University of Aarhus.
  5. Mukherjee, Dr. Kedar nath & Mishra, Dr. R. K., 2008. "Stock Market Integration and Volatility Spillover:India and its Major Asian Counterparts," MPRA Paper 12788, University Library of Munich, Germany.
  6. Horobet, Alexandra & Lupu, Radu, 2009. "Are Capital Markets Integrated? A Test of Information Transmission within the European Union," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 6(2), pages 64-80, June.

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