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International Transmission of Stock Market Movements
Cheol S. Eun and Sangdal Shim
The Journal of Financial and Quantitative Analysis
Vol. 24, No. 2 (Jun., 1989), pp. 241-256
Published by: Cambridge University Press on behalf of the University of Washington School of Business Administration
Stable URL: http://www.jstor.org/stable/2330774
Page Count: 16
You can always find the topics here!Topics: Stock markets, Vector autoregression, Quantitative analysis, Stock exchanges, Stock market indices, Stock prices, Market prices, Time zones, Stock market returns, Economics
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This paper investigates the international transmission mechanism of stock market movements by estimating a nine-market vector autoregression (VAR) system. Using simulated responses of the estimated VAR system, we (i) locate all the main channels of interactions among national stock markets, and (ii) trace out the dynamic responses of one market to innovations in another. Generally speaking, a substantial amount of multi-lateral interaction is detected among national stock markets. Innovations in the U.S. are rapidly transmitted to other markets in a clearly recognizable fashion, whereas no single foreign market can significantly explain the U.S. market movements. Also, the dynamic response pattern is found to be generally consistent with the notion of informationally efficient international stock markets.
The Journal of Financial and Quantitative Analysis © 1989 University of Washington School of Business Administration