Financial Markets and Portfolio Management

, Volume 19, Issue 2, pp 169–178 | Cite as

Price Linkages Between the US, Japan and UK Stock Markets

Article
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Abstract

This study presents an empirical analysis of the short- and long-term relationships among stock prices in the US, Japan and the UK. We re-examine the evidence of market linkages and cointegration between S&P 500, Nikkei 225 and FTSE-100 stock indices. The results suggest that mature markets are cointegrated, indicating a stationary long-run relationship. Furthermore, Granger causality tests show a bi-directional causality between Nikkei 225–FTSE-100, and unidirectional causalities between S&P 500–FTSE-100 and S&P 500–Nikkei 225. These findings suggest that the potential for diversifying risk by investing in mature markets is limited.

Keywords

Stock Market Empirical Analysis Granger Causality Stock Prex Stock Index 
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Copyright information

© Swiss Society for Financial Market Research 2005

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of Portsmouth, Portsmouth Business SchoolPortsmouthUK

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