The transmission of lnformation among stock markets: evidence from significant market movements

Abstract

We examine the transmission of information among the major stock markets in the Australasian region and the UK and US during April 1986 -July 1998 around significant movements in these markets. We find that all the markets move together when there is a significant fall in any one of these markets and the markets are volatile. However, there is not much co movement when there are significant rises in any of the markets, even in volatile markets. This indicates that bad news in any one market is considered as bad news in all markets during periods of high market volatility, but good news in any one market is not necessarily considered as good news in other markets. During periods of relatively low volatility, falls in the US have an effect on Australia and Hong Kong, but not on Japan or Singapore. Rises in the US generally do not have any influence on other markets In general, the UK has an effect only on the US when the UK market is falling, and during periods of high volatility. Finally, Japan appears to influence both the UK and the US when there is a significant fall in Japan during periods of high volatility.