EVOLUTION IN DYNAMIC LINKAGES ACROSS DAILY NATIONAL STOCK INDEXES

This article investigates how dynamic linkages among the daily rates of return of eight national stock indexes have evolved since 1972. A dynamic simultaneous equations model is estimated to describe the contemporaneous and lead/lag relationships across national equity markets over three different years: 1972, 1980, and 1987. Results reveal growing market interdependence within the same geographical region over time. While there are many significant intermarket relationships within the same 24-hour period, there are few significant lagged responses across markets beyond 24 hours. This suggests a high degree of international market efficiency. Furthermore, Japan's market influence has been growing to rival that of the USA. © 1991.