Actual and Warranted Relations between Asset Prices
One method of testing efficient-markets present-value models for speculative asset prices has been to test whether the variance of price changes exceeds theoretical variance bounds implied by the models. This paper extends this method from variances to covariances, so that one can test whether pairs of speculative asset prices move together too much relative to bounds implied by the efficient-markets models. The new method is used to examine the historical covariance between the U.K. and U.S. stock markets, 1919-89. In this case, no evidence is found of excess covariance between the two markets. Copyright 1993 by Royal Economic Society.
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Volume (Year): 45 (1993)
Issue (Month): 3 (July)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- King, Mervyn A & Wadhwani, Sushil, 1990.
"Transmission of Volatility between Stock Markets,"
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Society for Financial Studies, vol. 3(1), pages 5-33.
- Mervyn A. King & Sushil Wadhwani, 1989. "Transmission of Volatility Between Stock Markets," NBER Working Papers 2910, National Bureau of Economic Research, Inc.
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- Pindyck, Robert S & Rotemberg, Julio J, 1990. "The Excess Co-movement of Commodity Prices," Economic Journal, Royal Economic Society, vol. 100(403), pages 1173-1189, December.
- Pindyck, Robert S. & Rotemberg, Julio., 1987. "The excess co-movement of commodity prices," Working papers 1969-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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- King, Mervyn & Sentana, Enrique & Wadhwani, Sushil, 1994. "Volatility and Links between National Stock Markets," Econometrica, Econometric Society, vol. 62(4), pages 901-933, July.Full references (including those not matched with items on IDEAS)
- Mervyn King & Enrique Sentana & Sushil Wadhwani, 1990. "Volatiltiy and Links Between National Stock Markets," NBER Working Papers 3357, National Bureau of Economic Research, Inc.
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