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Dependencies between European stock markets when price changes are unusually large

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  • Schich, Sebastian T.
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    Abstract

    The present paper studies dependencies between European stock markets when returns are unusually large, using daily data on stock market indices for Germany, the United Kingdom, France, the Netherlands and Italy from 1973 to 2001. Dependency is measured by the conditional probability of an unusually large return in one market given an unusually large return in another and is estimated using an approach from multivariate extreme value theory. The paper finds the following. First, dependencies between markets in situations of unusually large returns have become closer over time. Second, they are generally higher for large negative returns than for large positive ones. Third, dependencies differ depending on the country pair considered. For example, stock markets in the Netherlands and France are more closely and those in the United Kingdom and Italy less closely linked to the German market. Fourth, overall dependencies are quite symmetric, in the sense that the conditional probability for an unusually large change given a large change in the other country is similar irrespective of which of the two countries the probability is conditioned on. -- Der vorliegende Beitrag untersucht die Abhängigkeiten zwischen Europäischen Aktienmärkten in Situationen ungewöhnlich grosser Kursschwankungen anhand von täglichen Daten der Aktienmarktindices für Deutschland, Großbitannien, Frankreich, die Niederlande und Italien von 1973 bis 2001. Abhängigkeit wird dabei gemessen anhand der bedingten Wahrscheinlichkeit einer ungewöhnlich grossen Preisveränderung auf einem Aktienmarkt, wenn eine ungewöhnlich grosse Preisveränderung auf einem anderen Markt gegeben ist. Diese Wahrscheinlichkeit wird geschätzt mit Hilfe eines Ansatzes aus der multivariaten Extremwerttheorie. Die Ergebnisse können folgendermaßen zusammengefaßt werden: Erstens sind die geschätzten Abhängigkeiten im Laufe der Zeit stärker geworden. Zweitens sind sie ausgeprägter im Falle negativer als im Falle positiver Kursbewegungen. Drittens sind sie unterschiedlich je nach betrachtetem Länderpaar. So stehen die Aktienmärkte in Frankreich und den Niederlanden in jeweils relativ starker gegenseitiger Abhängigkeit in Bezug auf den deutschen Aktienmarkt, während die Aktienmärkte in Grossbritannien und Italien weniger eng mit dem deutschen Aktienmarkt verbunden sind. Viertens sind die Abhängigkeiten zwischen zwei Märkten generell symmetrisch in dem Sinne, dass die geschätzte bedingte Wahrscheinlichkeit weitgehend unabhängig davon ist, auf welchen der beiden Märkte die Wahrscheinlichkeit konditioniert wird.

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    Bibliographic Info

    Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2002,12.

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    Date of creation: 2002
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    Handle: RePEc:zbw:bubdp1:4177

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    Related research

    Keywords: Multivariate extreme value analysis; International equity market linkages; Integration of European equity markets;

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