Transmission of Volatility Between Stock Markets
This paper investigates why, in October 1987, almost all stock markets fell together despite widely differing economic circumstances. The idea is that "contagion" between markets occurs as the result of attempts by rational agents to infer information from price changes in other markets. This provides a channel through which a "mistake" in one market can be transmitted to other markets. Hourly stock price data from New York, Tokyo and London during an eight month period around the crash offer support for the contagion model. In addition, the magnitude of the contagion coefficients are found to increase with volatility.
|Date of creation:||Mar 1989|
|Date of revision:|
|Publication status:||published as Review of Financial Studies, Vol. 3, No. 1, pp. 5-33, 1990.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Grossman, Sanford J, 1981. "An Introduction to the Theory of Rational Expectations under Asymmetric Information," Review of Economic Studies, Wiley Blackwell, vol. 48(4), pages 541-59, October.
- Green, Jerry, 1977. "The Non-existence of Informational Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 451-63, October.
- Sanford Grossman, 1978.
"Further results on the informational efficiency of competitive stock markets,"
Special Studies Papers
114, Board of Governors of the Federal Reserve System (U.S.).
- Grossman, Sanford, 1978. "Further results on the informational efficiency of competitive stock markets," Journal of Economic Theory, Elsevier, vol. 18(1), pages 81-101, June.
- Bray, Margaret, 1985. "Rational Expectations, Information and Asset Markets: An Introduction," Oxford Economic Papers, Oxford University Press, vol. 37(2), pages 161-95, June.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2910. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.