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Stochastic Trends and Cycles in National Stock Market Indices: Evidence from the U.S., the U.K. and Switzerland

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  • Frank Westermann

Abstract

Co-movements of stock market indices in the U.S., the U.K. and Switzerland are analyzed using recent time series procedures. None of the series are found to share common permanent stochastic shocks that drive their long-run fluctuations. In the short run, however, there is evidence of a common serial correlation feature. Further, it is found that the U.S. stock index Granger causes the two other markets. Nevertheless, impulse response functions show little evidence of international spillovers and in a variance decomposition of forecast errors, most of the fluctuations are found to be attributable to shocks from the respective domestic market.

Suggested Citation

  • Frank Westermann, 2002. "Stochastic Trends and Cycles in National Stock Market Indices: Evidence from the U.S., the U.K. and Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(III), pages 317-328, September.
  • Handle: RePEc:ses:arsjes:2002-iii-5
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    Cited by:

    1. Flad, Michael & Jung, Robert C., 2008. "A common factor analysis for the US and the German stock markets during overlapping trading hours," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(5), pages 498-512, December.
    2. Trofimov, Ivan D., 2013. "Nonparametric Approach to Portfolio Diversification: The Case of Australian Equity Market - Un approccio non-parametrico alla diversificazione del portafoglio: il caso del mercato azionario australian," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 66(1), pages 87-112.
    3. repec:fgv:epgrbe:v:68:n:2:a:6 is not listed on IDEAS
    4. Matos, Paulo Rogério Faustino & Bueno, Amadeus & Trompieri, Nicolino, 2014. "Análise de Integração Financeira na América do Sul," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 68(2), June.
    5. Trofimov, Ivan D., 2013. "Nonparametric approach to portfolio diversification: the case of Australian equity market," MPRA Paper 79562, University Library of Munich, Germany.

    More about this item

    Keywords

    Stock Market Indices; Return Correlation; Cointegration; Common Features;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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