Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/123154
Authors: 
Caporale, Guglielmo Maria
Gil-Alana, Luis A.
Orlando, C. James
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5523
Abstract: 
This paper analyses the long-memory properties of US and European stock indices, as well as their linkages, using fractional integration and fractional cointegration techniques. These methods are more general and have higher power than the standard ones usually employed in the literature. The empirical evidence based on them suggests the presence of unit roots in both the S&P 500 Index and the Euro Stoxx 50 Index. Also, fractional cointegration appears to hold at least for the subsample from December 1996 to March 2009 ending when the global financial crisis was still severe; subsequently, the US and European stock markets diverged and followed different recovery paths, possibly as a result of various factors such as diverging growth and monetary policy. Establishing whether the degree of cointegration has changed over time is important since past literature has shown that diversification benefits arise when markets are not cointegrated.
Subjects: 
stock markets
linkages
fractional integration
fractional cointegration
JEL: 
C32
G15
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.