Spillovers and Correlations between US and Major European Stock Markets: The Role of the Euro
AbstractThis paper investigates the transmission of price and volatility spillovers across the New York, London, Frankfurt and Paris stock markets under the framework of the multivariate EGARCH model. The model is extended to allow dynamic conditional correlations, with the correlations allowed to change with the introduction of the Euro. By using daily closing prices recorded at 16:00 London time (pseudo-closing prices) we find evidence that domestic stock returns and volatilities are influenced by the behavior of foreign markets, with both volatilities and conditional correlations responding asymmetrically to news/innovations in other markets. The findings also indicate that the correlations of returns have increased for all markets since the launch of the Euro, with that between Frankfurt and Paris experiencing the largest increase.
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Bibliographic InfoPaper provided by Economics, The University of Manchester in its series The School of Economics Discussion Paper Series with number 0541.
Date of creation: 2005
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- Christos Savva & Denise Osborn & Len Gill, 2009. "Spillovers and correlations between US and major European stock markets: the role of the euro," Applied Financial Economics, Taylor & Francis Journals, vol. 19(19), pages 1595-1604.
- C S Savva & D R Osborn & L Gill, 2005. "Spillovers and Correlations between US and Major European Stock Markets: The Role of the Euro," The School of Economics Discussion Paper Series 0515, Economics, The University of Manchester.
- C S Savva & D R Osborn & L Gill, 2005. "Spillovers and Correlations between US and Major European Stock Markets: The Role of the Euro," Centre for Growth and Business Cycle Research Discussion Paper Series 64, Economics, The Univeristy of Manchester.
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