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Common stochastic trends and the dynamic linkages driving european stock markets: evidence from pre- and post-october 1987 crash eras

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  • Rumi Masih
  • A. Mansur
  • M. Masih

Abstract

Given the impact of the October 1987 crash pre-empting fears of a deep-seated financial collapse, there is now much scope for assessing its importance quantitatively. In this paper, time series techniques are used to analyse the dynamic linkages and propagation of shocks among five European stock markets. While we do not find any long-run relationship of stock markets over the entire sample ped, evidence is found in support of a unique cointegrating vector over each of the pre- and post-crash samples. Furthermore, the dynamic analysis reveals that the lead-lag relationships changed quite significantly over the sample following the crash.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

Volume (Year): 10 (2004)
Issue (Month): 1 ()
Pages: 81-104

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Handle: RePEc:taf:eurjfi:v:10:y:2004:i:1:p:81-104

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Related research

Keywords: Stock price index; Pre/post crash; Granger temporal causality; Cointegration; Vector error-correction model; Variance decomposition; Impulse response function;

References

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  1. Schwert, G.W., 1988. "Business Cycles, Financial Crises And Stock Volatility," Papers 88-06, Rochester, Business - General.
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Cited by:
  1. Ceylan Onay & Gözde Ünal, 2012. "Cointegration and Extreme Value Analyses of Bovespa and the Istanbul Stock Exchange," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(1), pages 66-90, February.

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