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Stochastic Trends and Cycles in National Stock Market Indices: Evidence from the U.S., the U.K. and Switzerland

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  • Frank Westermann

Abstract

Co-movements of stock market indices in the U.S., the U.K. and Switzerland are analyzed using recent time series procedures. None of the series are found to share common permanent stochastic shocks that drive their long-run fluctuations. In the short run, however, there is evidence of a common serial correlation feature. Further, it is found that the U.S. stock index Granger causes the two other markets. Nevertheless, impulse response functions show little evidence of international spillovers and in a variance decomposition of forecast errors, most of the fluctuations are found to be attributable to shocks from the respective domestic market.

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Bibliographic Info

Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

Volume (Year): 138 (2002)
Issue (Month): III (September)
Pages: 317-328

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Handle: RePEc:ses:arsjes:2002-iii-5

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Keywords: Stock Market Indices; Return Correlation; Cointegration; Common Features;

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Cited by:
  1. Flad, Michael & Jung, Robert C., 2008. "A common factor analysis for the US and the German stock markets during overlapping trading hours," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(5), pages 498-512, December.

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