Use this identifier to quote or link this document: http://hdl.handle.net/2072/8950

Co-movements between US and UK stock prices: the roles of macroeconomic information and time-series varying conditional correlations
Aslanidis, Nektarios; Osborn, Denise R.; Sensier, Marianne
Universitat Rovira i Virgili. Departament d'Economia
This paper provides evidence on the sources of co-movement in monthly US and UK stock price movements by investigating the role of macroeconomic and financial variables in a bivariate system with time-varying conditional correlations. Crosscountry communality in response is uncovered, with changes in the US Federal Funds rate, UK bond yields and oil prices having similar negative effects in both markets. Other variables also play a role, especially for the UK market. These effects do not, however, explain the marked increase in cross-market correlations observed from around 2000, which we attribute to time variation in the correlations of shocks to these markets. A regime-switching smooth transition model captures this time variation well and shows the correlations increase dramatically around 1999-2000. JEL classifications: C32, C51, G15 Keywords: international stock returns, DCC-GARCH model, smooth transition conditional correlation GARCH model, model evaluation.
2008
339 - Comerç. Relacions econòmiques internacionals. Economia mundial. Màrqueting
Anàlisi de sèries temporals
Models economètrics
Finances internacionals
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Working Paper
1988 - 0812
Documents de treball del Departament d'Economia;2008-05
         

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