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Major World Equity Market Interdependence a Decade After the 1987 Crash: Evidence From Cross Spectral Analysis
Author(s) -
Smith Kenneth L.
Publication year - 1999
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00260
Subject(s) - crash , equity (law) , european union , economics , econometrics , financial economics , political science , international economics , computer science , law , programming language
Several studies have focused on the pre‐ post‐October 1987 crash. Results indicate that major market equity correlations rose during the crash period. Cross spectral analysis is applied to six of the G‐7 markets to determine whether frequency domain correlations have increased post‐crash relative to the pre‐crash period. The results indicate that correlations have increased for most of the markets studied. Most striking are the increased post‐crash correlations among the three European markets, in light of the European Union. Additional evidence shows mixed results regarding frequency domain phase leads among the markets.