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Spillovers and Correlations between US and Major European Stock Markets: The Role of the Euro

Christos Savva (), Denise Osborn () and L Gill

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The Univeristy of Manchester

Abstract: This paper investigates the transmission of price and volatility spillovers across the New York, London, Frankfurt and Paris stock markets under the framework of the multivariate EGARCH model. The model is extended to allow dynamic conditional correlations, with the correlations allowed to change with the introduction of the Euro. By using daily closing prices recorded at 16:00 London time (pseudo-closing prices) we find evidence that domestic stock returns and volatilities are influenced by the behavior of foreign markets, with both volatilities and conditional correlations responding asymmetrically to news/innovations in other markets. The findings also indicate that the correlations of returns have increased for all markets since the launch of the Euro, with that between Frankfurt and Paris experiencing the largest increase.

New Economics Papers: this item is included in nep-eec
Date: 2005
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Related works:
Journal Article: Spillovers and correlations between US and major European stock markets: the role of the euro (2009) Downloads
Working Paper: Spillovers and Correlations between US and Major European Stock Markets: The Role of the Euro (2005) Downloads
Working Paper: Spillovers and Correlations between US and Major European Stock Markets: The Role of the Euro (2005) Downloads
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