Author : Robert A. Connolly
Publisher :
ISBN 13 :
Total Pages : 57 pages
Book Rating : 4.:/5 (129 download)
Book Synopsis On Stock Market Return Co-Movements by : Robert A. Connolly
Download or read book On Stock Market Return Co-Movements written by Robert A. Connolly and published by . This book was released on 2012 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We document and explain the return co-movement for the U.S., U.K., and Japanese equity markets for the period of 1985-1996. Our empirical results show the importance of imperfect signal-extraction in explaining the equity market return co-movement. In such a setting, domestic investors try to extract the unobservable global factors from foreign market returns and use the extracted information in their subsequent domestic trading. In this imperfect learning environment, domestic investors respond to the foreign return signal more strongly if the signal is more precise. In addition, trading noise may also affect the return-generating process in domestic markets. We find this contagion effect is most pronounced in the extreme down markets.