Short- and long-term links among European and US stock markets
Author
Gerrits, Robert-Jan
Advisor
Yüce, Ayşe
Date
1995Publisher
Bilkent University
Language
English
Type
ThesisItem Usage Stats
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Abstract
Recently, national economies are becoming more internationalized because of
increased trade and more cooperation between national governments to remove the
barriers to free flow of goods, services, and financial, physical and human capital. The
relationship between equity markets in various countries have been extensively
examined in the literature. This study tests the interdependence between stock prices
in Germany, the UK, the Netherlands and the US, using daily closing prices for the
period between March 1990 and October 1994. Results of the tests showed that the
US exerts a significant impact on the European markets. Moreover, the three
European markets influence each other in the short- and long-run. This result implies
that these markets move together. Therefore, diversification among those national
stock markets will not greatly reduce the portfolio risk without sacrificing expected
return.