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Do the US trends drive the UK-French market linkages?: empirical evidence from a threshold intraday analysis

Author

Listed:
  • Fredj Jawadi

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique, Amiens School of Management - Amiens School of Management, UEVE - Université d'Évry-Val-d'Essonne, LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - EESC-GEM Grenoble Ecole de Management - UEVE - Université d'Évry-Val-d'Essonne - TEM - Télécom Ecole de Management)

  • Waël Louhichi

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Hachmi Ben Ameur

    (Amiens School of Management - Amiens School of Management)

Abstract

This article investigates the impact of US stock market openings on linkages between the UK and French markets. Using intraday data over the period December 2004 to March 2009, we find significant time-varying dependence between the UK and French stock returns, which alter according to the state of the US market. Indeed, not only does the opening of the US market itself significantly affect the UK stock dependency, but such linkages also seem to be closely dependent on bearish or bullish US market trends. Interestingly, the estimation of a two-regime Threshold Autoregressive (TAR) model indicates that the bearish US trends are a source of minor linkage (lower regime), whereas the bullish US trends involve higher interdependency (upper regime). This finding is particularly interesting as following the US trend expectations enables us to better forecast future European stock prices and to calculate the level of their potential contagion effects.

Suggested Citation

  • Fredj Jawadi & Waël Louhichi & Hachmi Ben Ameur, 2013. "Do the US trends drive the UK-French market linkages?: empirical evidence from a threshold intraday analysis," Post-Print halshs-00875569, HAL.
    • Handle: RePEc:hal:journl:halshs-00875569
    DOI: 10.1080/13504851.2012.714064
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    Cited by:

    1. Bahcivan, Hulusi & Karahan, Cenk C., 2022. "High frequency correlation dynamics and day-of-the-week effect: A score-driven approach in an emerging market stock exchange," International Review of Financial Analysis, Elsevier, vol. 80(C).

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