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International Transmission of Stock Market Movements

Published online by Cambridge University Press:  06 April 2009

Cheol S. Eun  and
Sangdal Shim
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Abstract

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.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 24 , Issue 2 , June 1989 , pp. 241 - 256
Copyright
Copyright © School of Business Administration, University of Washington 1989

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