Stock market integration and the speed of information transmission

Alexandr Černý

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: Using a unique dataset covering 8 months of high frequency data on the indices from markets in the U.S., London, Frankfurt, Paris, Warsaw, and Prague, I investigate the issue of stock market integration from a novel perspective. Cointegration and Granger causality tests with data of different frequencies (from 5 minutes to 1 day) are performed. The aim is to describe the time structure in which markets react to the information revealed in prices on other markets. Particularly, I want to detect the speed of information transmission between the differentmarkets. The results suggest that markets react very quickly to the information revealed in the prices on other markets. In all cases the reaction occurs as soon as within 1 hour. The U.S. markets seem to be an important source of information for the markets in London and Frankfurt, which react within 30 minutes, with the first reaction occurring already within 5 minutes. Information transmission between the market in London and any of the two continental markets in Paris or Frankfurt appears to be relatively unimportant compared to the information transmission between the two continental markets. The stock market in Paris seems to react to the information revealed at the stock market in Frankfurt with a delay of 40 minutes to 1 hour. Similarly, the two relatively small Eastern European markets in Warsaw and Prague are found to react to the information revealed in the stock market prices in Frankfurt. The reaction of the market in Prague seems to be faster, occurring within 30 minutes, while reaction speed of the market in Warsaw is around 1 hour.

Keywords: Stock market integration; Market comovement; High-frequency data; Speed of information transmission; Cointegration; Granger causality. (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2004-11
New Economics Papers: this item is included in nep-eec, nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: Stock Market Integration and the Speed of Information Transmission (2008)
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