Returns Synchronization and Daily Correlation Dynamics Between International Stock Markets
Erasmus University Rotterdam (EUR); Robeco Asset Management
University of Manchester - Business School
October 13, 1999
Lancaster University, Accounting & Finance Department Working Paper No. 99/011
The use of close-to-close returns underestimates returns correlation because international stock markets have different trading hours. With the availability of 16:00 (London time) stock market series, we find dynamics of daily correlation and daily covariance, estimated using two non-synchroneity adjustment procedures, to be substantially different from their synchronous counterparts. We find volatility spillovers from the US to the UK and France, and there is also evidence of reverse spillovers which is not documented before. Daily covariance increases during volatile periods. But, unlike previous findings, the increase in daily correlation is prominent only under extremely adverse conditions when a large negative return has been registered.
Number of Pages in PDF File: 34
JEL Classification: C4, G1working papers series
Date posted: October 21, 1999
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo5 in 0.500 seconds