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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

21 Pages Posted: 19 May 2006  

Yasushi Hamao

Center on Japanese Economy and Business; University of Southern California - Marshall School of Business - Finance and Business Economics Department

Ronald W. Masulis

University of New South Wales - Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Victor Ng

University of Michigan at Ann Arbor

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 Classification: F2, F36, G15

Suggested Citation

Hamao, Yasushi and 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: https://ssrn.com/abstract=903380

Yasushi Hamao

Center on Japanese Economy and Business ( email )

3022 Broadway
New York, NY 10027
United States
310-717-0503 (Phone)

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States
310-717-0503 (Phone)

Ronald W. Masulis (Contact Author)

University of New South Wales - Australian School of Business ( email )

Sydney, NSW 2052
Australia
612-9385-5860 (Phone)
612-9385-6347 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Victor Ng

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

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