Correlation of Returns in Non-Contemporaneous Markets

Emel Kahya
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Emel Kahya: Rutgers University, U.S.A.

Multinational Finance Journal, 1997, vol. 1, issue 2, 123-135

Abstract: This article investigates the effects of non-overlapping trading hours on the correlations and cross-serial correlations of returns in non-contemporaneous stock markets and develops a simple formula for calculating contemporaneous correlation measures. The presence of these effects is illustrated empirically using stock market returns data for the U.S., Japan, and the U.K. The results indicate that daily correlations of returns in these markets are biased downward while daily cross-serial correlations of returns are biased upwards. These findings have significant implications for studies investigating the transmission mechanism of stock price innovations across national stock markets and portfolio management.

Keywords: mean spillovers; contemporaneous correlations of returns. (search for similar items in EconPapers)
JEL-codes: G15 (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:mfj:journl:v:1:y:1997:i:2:p:123-135

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