Co-Movements of European Equity Markets Before and After the 1987 Crash

Ilhan Meric and Gulser Meric
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Ilhan Meric: Rider University, U.S.A.
Gulser Meric: Rowan University, U.S.A.

Multinational Finance Journal, 1997, vol. 1, issue 2, 137-152

Abstract: This article studies the changes in the co-movements of the twelve largest European equity markets after the 1987 international equity market crash. Tests based on Box M and principal component analysis indicate that the comovements of these equity markets changed significantly after the crash. Low correlations among national equity markets are often presented as evidence in support of the benefits of international portfolio diversification. The findings indicate that correlations among the twelve largest European equity markets and between these equity markets and the U.S. equity market increased substantially; therefore, the benefits of international diversification with these twelve European equity markets decreased considerably after the crash.

Keywords: correlation of returns; Box M analysis; European equity markets co-movements; principal component analysis (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 (31)

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Persistent link: https://EconPapers.repec.org/RePEc:mfj:journl:v:1:y:1997:i:2:p:137-152

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