Intraday linkages between the Spanish and the US stock markets: evidence of an overreaction effect

Jose Luis Miralles-Marcelo, Jose Luis Miralles-Quiros and Maria del Mar Miralles-Quiros
Authors registered in the RePEc Author Service: José Luis Miralles Quirós and Jose Luis Miralles Marcelo

Applied Economics, 2010, vol. 42, issue 2, 223-235

Abstract: This paper focuses on short-term information transmission between the US stock market, properly the DOW index, and the main Spanish stock index, IBEX-35, in its early and final hours. We follow the approaches of Lin, Engle and Ito (1994), Susmel and Engle (1994) and Baur and Jung (2005) who use a GARCH model to analyze the influence of the previous daytime and overnight returns and volatility of the DOW upon the overnight returns and daytime returns of the IBEX from Open-to-3:30 and from 3:30-to-Close. The results suggest that the Spanish stock market usually has a low price movement till Wall Street opens. Additionally, they indicate that the Spanish market reacts quickly to the news, basically in the first four minutes following the opening of the US market. Furthermore, we find the existence of an overreaction effect during the two hours before the closing of the Spanish market.

Date: 2010
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Citations: View citations in EconPapers (7)

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DOI: 10.1080/00036840701579192

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