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Common stochastic trends and the dynamic linkages driving european stock markets: evidence from pre- and post-october 1987 crash eras

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  • Rumi Masih
  • A. Mansur
  • M. Masih

Abstract

Given the impact of the October 1987 crash pre-empting fears of a deep-seated financial collapse, there is now much scope for assessing its importance quantitatively. In this paper, time series techniques are used to analyse the dynamic linkages and propagation of shocks among five European stock markets. While we do not find any long-run relationship of stock markets over the entire sample ped, evidence is found in support of a unique cointegrating vector over each of the pre- and post-crash samples. Furthermore, the dynamic analysis reveals that the lead-lag relationships changed quite significantly over the sample following the crash.

Suggested Citation

  • Rumi Masih & A. Mansur & M. Masih, 2004. "Common stochastic trends and the dynamic linkages driving european stock markets: evidence from pre- and post-october 1987 crash eras," The European Journal of Finance, Taylor & Francis Journals, vol. 10(1), pages 81-104.
  • Handle: RePEc:taf:eurjfi:v:10:y:2004:i:1:p:81-104
    DOI: 10.1080/13518470110040591
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    References listed on IDEAS

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    Cited by:

    1. David Gray, 2014. "Central European foreign exchange markets: a cross-spectral analysis of the 2007 financial crisis," The European Journal of Finance, Taylor & Francis Journals, vol. 20(6), pages 550-567, June.
    2. Ceylan Onay & Gözde Ünal, 2012. "Cointegration and Extreme Value Analyses of Bovespa and the Istanbul Stock Exchange," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(1), pages 66-90, February.
    3. Hüseyin Dağli; & Uğur Sivri & Semra Bank, 2012. "International portfolio diversification opportunities between Turkey and other emerging markets," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 5(1), pages 4-23.

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