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Price Linkages Between the US, Japan and UK Stock Markets

  • Christos Floros

    ()

This study presents an empirical analysis of the short- and long-term relationships among stock prices in the US, Japan and the UK. We re-examine the evidence of market linkages and cointegration between S&P 500, Nikkei 225 and FTSE-100 stock indices. The results suggest that mature markets are cointegrated, indicating a stationary long-run relationship. Furthermore, Granger causality tests show a bi-directional causality between Nikkei 225–FTSE-100, and unidirectional causalities between S&P 500–FTSE-100 and S&P 500–Nikkei 225. These findings suggest that the potential for diversifying risk by investing in mature markets is limited. Copyright Swiss Society for Financial Market Research 2005

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File URL: http://hdl.handle.net/10.1007/s11408-005-3384-2
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Article provided by Springer in its journal Financial Markets and Portfolio Management.

Volume (Year): 19 (2005)
Issue (Month): 2 (August)
Pages: 169-178

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Handle: RePEc:kap:fmktpm:v:19:y:2005:i:2:p:169-178
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  1. Niklas Ahlgren & Jan Antell, 2002. "Testing for cointegration between international stock prices," Applied Financial Economics, Taylor & Francis Journals, vol. 12(12), pages 851-861.
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  12. Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2002. "Some Contagion, Some Interdependence: More Pitfalls in Tests of Financial Contagion," CEPR Discussion Papers 3310, C.E.P.R. Discussion Papers.
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