Price Volatility and Volume Spillovers Between the Tokyo and New York Stock Markets, Issue 4592
This paper presents a comprehensive study of the interactions among returns, volatility, and trading volume between the U.S. and Japanese stock markets by using intradaily data from October 1985 to December 1991. By examining the effect of foreign price volatility and trading volume on correlations between foreign and domestic stock returns, the paper aims to distinguish between the market contagion and informational efficiency hypotheses in order to explain the cause of international transmission of stock returns and volatility. Major findings are three-fold: (1) contemporaneous correlations of stock returns across these two markets are significant and tend to increase during a high volatility period, which support the informational efficiency hypothesis; (2) lagged volatility and volume spillovers are not found across the two markets; (3) the effect of the New York stock returns on the Tokyo returns exhibits a structural change in October 1987.
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absolute returns Albert Ando asymmetric effects autocorrelations backward moving average big shock Black Monday Bureau of Economic Coeff coefficient conditional variances contemporaneous correlations correlations of stock covariance matrix Crash period Cross-Market Dependence day-of-week effect daytime and overnight dependence in stock domestic investors domestic market domestic overnight return Engle Financial Studies foreign daytime returns foreign information foreign market foreign price change foreign trading volume GARCH Heteroskedasticity holiday effects increase informational efficiency hypothesis intermarket dependence international stock returns international transmission Journal of Finance Kathleen McGarry King and Wadhwani Kleidon lagged spillovers NBER Working Paper Nihon Keizai Shimbun Nikkei Nikkei index null hypothesis October opening prices p-value Panel Paul Krugman price volatility rate of information Regime returns and volatility Review of Financial stock prices T-stat Takatoshi Ito Tokyo market transmission of stock volatility and volume volatility spillovers volume spillovers Wald test York and Tokyo