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The Effects of the 1987 Stock Crash on International Financial Integration

Yasushi Hamao
University of Southern California - Marshall School of Business - Finance and Business Economics Department

Ronald W. Masulis
Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - School of Law

Victor Ng
University of Michigan at Ann Arbor



JAPANESE FINANCIAL MARKET RESEARCH, W. Ziemba, W. Bailey and Y. Hamao, editors, North Holland Publisher, 1991

Abstract:     
This paper examines daily open-to-close returns of major stock market indices on the New York Stock Exchange, Tokyo Stock Exchange and the London Stock Exchange over the 1985-1990 period, which encompasses the October 1987 Stock Market Crash. We estimate volatility spillover effects across the 24 hour day using a GARCH-M model. We find evidence that volatility spillover effects emanating from Japan have been gathering strength over time, especially after the 1987 Crash. This may reflect a growing awareness by domestic investors of the economic interdependence of international financial markets since the 1987 Stock Market Crash.

Keywords: International Stock Markets, Price and Volatility Spillovers, London Stock Exchange, Tokyo Stock Exchange, New York Stock Exchange, Stock Market Crash, GARCH, Financial Integration

JEL Classifications: F2, F36, G15

Accepted Paper Series

Date posted: May 19, 2006 ; Last revised: May 19, 2006

Suggested Citation

Hamao, Yasushi, Masulis, Ronald W. and Ng, Victor, The Effects of the 1987 Stock Crash on International Financial Integration. JAPANESE FINANCIAL MARKET RESEARCH, W. Ziemba, W. Bailey and Y. Hamao, editors, North Holland Publisher, 1991. Available at SSRN: http://ssrn.com/abstract=903380


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Contact Information

Ronald W. Masulis (Contact Author)
Vanderbilt University - Owen Graduate School of Management ( email )
401 21st Avenue South
Nashville, TN 37203
United States
615-322-3687 (Phone)
615-343-7177 (Fax)
Vanderbilt University - School of Law
131 21st Avenue South
Nashville, TN 37203-1181
United States
Yasushi Hamao
University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
(213) 740-0822 (Phone)
Victor Ng
University of Michigan at Ann Arbor ( email )
Ann Arbor, MI 48109
United States
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