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Short- and long-term links among European and US stock markets

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  • Robert-Jan Gerrits
  • Ayse Yuce
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    Abstract

    Recently, national economies have become more internationalized because of increased trade and increased cooperation between national governments leading to removal of barriers to free flow of goods and services, and financial, physical and human capital. The relationship between equity markets in various countries has been examined extensively in the literature. This study tests the interdependence between stock prices in Germany, the UK, the Netherlands and the US, using daily closing prices for the period between March 1990 and October 1994. Results of the tests show that the US exerts a significant impact on European markets. Moreover, the three European markets influence each other in the short and long run. Therefore, diversification among these national stock markets will not greatly reduce the portfolio risk without sacrificing the expected return.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/096031099332483
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    Bibliographic Info

    Article provided by Taylor and Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 9 (1999)
    Issue (Month): 1 ()
    Pages: 1-9

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    Handle: RePEc:taf:apfiec:v:9:y:1999:i:1:p:1-9

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    Cited by:
    1. Syriopoulos, Theodore, 2007. "Dynamic linkages between emerging European and developed stock markets: Has the EMU any impact?," International Review of Financial Analysis, Elsevier, vol. 16(1), pages 41-60.
    2. N Aslanidis & D R Osborn & M Sensier, 2003. "Explaining movements in UK stock prices: How important is the US market?," Centre for Growth and Business Cycle Research Discussion Paper Series 27, Economics, The Univeristy of Manchester.
    3. Silvo Dajčman, 2013. "Interdependence Between Some Major European Stock Markets - A Wavelet Lead/Lag Analysis," Prague Economic Papers, University of Economics, Prague, vol. 2013(1), pages 28-49.
    4. Joseph Friedman & Yochanan Shachmurove, 2005. "European Stock Market Dynamics Before and After the Introduction of the Euro," PIER Working Paper Archive 05-028, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    5. Bank for International Settlements & Hong Kong Institute for Monetary Research, 2008. "Regional financial integration in Asia: present and future," BIS Papers, Bank for International Settlements, number 42, March.
    6. Heung Wong & W. Li & Shiqing Ling, 2005. "Joint modeling of cointegration and conditional heteroscedasticity with applications," Annals of the Institute of Statistical Mathematics, Springer, vol. 57(1), pages 83-103, March.
    7. Bank for International Settlements, 2008. "Integration of India's stock market with global and major regional markets," BIS Papers chapters, in: Bank for International Settlements (ed.), Regional financial integration in Asia: present and future, volume 42, pages 202-236 Bank for International Settlements.
    8. Aristeidis G. Samitas & Dimitris F. Kenourgios, 2007. "Macroeconomic factors' influence on 'new' European countries' stock returns: the case of four transition economies," International Journal of Financial Services Management, Inderscience Enterprises Ltd, vol. 2(1), pages 34-49, January.
    9. Laopodis, Nikiforos T., 2005. "Portfolio diversification benefits within Europe: Implications for a US investor," International Review of Financial Analysis, Elsevier, vol. 14(4), pages 455-476.
    10. Erie Febrian & Aldrin Herwany, 2009. "Volatility Forecasting Models and Market Co-Integration: A Study on South-East Asian Markets," Working Papers in Economics and Development Studies (WoPEDS) 200911, Department of Economics, Padjadjaran University, revised Sep 2009.
    11. Aldrin Herwany & Erie Febrian, 2009. "Co-integration and Causality Analysis on Developed Asian Markets For Risk Management & Portfolio Selection," Working Papers in Economics and Development Studies (WoPEDS) 200909, Department of Economics, Padjadjaran University, revised Sep 2009.
    12. Sarantis, Nicholas, 2001. "Nonlinearities, cyclical behaviour and predictability in stock markets: international evidence," International Journal of Forecasting, Elsevier, vol. 17(3), pages 459-482.
    13. Nektarios Aslanidis & Denise Osborn & Marianne Sensier, 2003. "Explaining movements in UK stock prices:," Working Papers 0302, University of Crete, Department of Economics.
    14. Syriopoulos, Theodore, 2011. "Financial integration and portfolio investments to emerging Balkan equity markets," Journal of Multinational Financial Management, Elsevier, vol. 21(1), pages 40-54, February.

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