COVARIABILITY OF MAJOR EQUITY MARKETS AROUND THE OCTOBER 1987 CRASH: TESTS OF GRANGER CAUSALITY

Abstract

This study examined the level of interdependecies which existed among several major equity markets around the October 19, 1987, crash. Three different statistical techniques were utilized to analyze daily data for three months before and after the crash. All three techniques revealed that the major equity markets were more closely integrated during the post‐crash subperiod than the pre‐crash subperiod. The existence of the uni‐directional causality from the U.S. to Canada and from the U.S. to U.K. and bi‐directional causality between the U.S. and Japan during the post‐crash subperiod indicate that the U.S. market volatility contributed to the volatility in the foreign markets.

Citation

Mansur, I. (1991), "COVARIABILITY OF MAJOR EQUITY MARKETS AROUND THE OCTOBER 1987 CRASH: TESTS OF GRANGER CAUSALITY", International Journal of Commerce and Management, Vol. 1 No. 1/2, pp. 90-101. https://doi.org/10.1108/eb047276