اندازه گیری ادغام بازار سهام با استفاده از جریان اطلاعات ناهمبسته : توکیو، لندن و نیویورک

Equity markets do not pass all overnight information into prices instantly at the opening of trade. We adjust open-to-close return series for non-instantaneous information absorption and then use adjusted series to measure integration among three major equity markets. Because the adjusted daytime return series are uncorrelated, we can accurately measure the size, and identify the sources, of transmissions. Overnight news, as represented by foreign open-to-close returns, explains 13% of opening price variation (close-to-open returns) in New York, 14% in Tokyo and 30% in London. For New York and Tokyo, the largest influences come from the market that trades immediately prior (London and New York respectively) whereas opening price variation in London is linked closer with New York than Tokyo. Foreign volatility spillovers are also significant, and subject to asymmetric effects.

Variations in opening prices in the Tokyo, London and New York equity markets are significantly predicted by the returns and volatility patterns of overnight foreign trade. This predictability does not contradict market efficiency (since there is no opportunity to trade between the close and opening of a market), but it does identify the common information flows between the three markets, and offers a yardstick for measuring integration. Using intra-daily data on the S&P 500 (New York), the Nikkei 225 (Japan) and the FTSE 100 (London) indices, we search the early hours of trade in each market for the point of zero correlation with lagged foreign and domestic open-to-close returns. We make this the reference point for measuring the arrival of truly new information, and the starting point for adjusting returns calculations. We can then use the resulting zero-correlation open-to-close returns as explanators for opening price variation (close-to-open returns). By isolating the early-trade ‘opening’ price, which fully reflects preceding information, up to a one-half-hour interval accuracy, our new method improves the quality of integration measures for these markets. Other studies recognize that estimates based on raw opening prices are likely to mis-measure the size of transmissions between markets by omitting relevant information (see, for example, Baur and Jung, 2006 and Lin et al., 1994 and Susmel and Engle, 1994). Since our adjusted daytime returns are orthogonal explanatory variables in a model of opening price variation, we can identify both the size and the source of foreign market effects on price change and volatility with more ease and precision than when more arbitrary adjustments are made.1 Results show stronger and more significant mutual spillovers occurring between all three markets than have been reported previously. About 13% of the log change in close-to-opening price in New York, 14% in Tokyo and 30% in London is explained by foreign daytime returns. The strongest impact on New York and Tokyo is from the markets that trade immediately prior to them, that is, London and New York respectively. London, however, appears to be much more dependent on New York's daytime return than on Tokyo's, despite the fact that New York's news is older. Spillovers from foreign daytime volatility explain 9% of opening price conditional variance in New York, 3% in Tokyo and 2% in London. We also find evidence of asymmetric effects in returns and volatility spillovers associated with negative foreign returns.

We apply a new approach to gauging equity market linkages, which allows for non-instantaneous adjustments to overnight news. The approach we adopt has several advantages over previously used methods. First, we explicitly test the data and ensure that foreign overnight news has been absorbed by the market price from which returns are computed before estimating financial market linkages, thus creating more accurate measures of return and volatility spillovers. Secondly, this adjustment process means that daytime returns from domestic and international markets within the one 24-h period are uncorrelated, a property that allows us to break down the incremental impact of news from each market. Thirdly, we account for asymmetric responses of conditional returns and variances to negative news from domestic and foreign markets. Information transmission is mutual between all three markets; however, the strongest effects emerge from New York, followed by London (which explains more than 10.5% of New York's overnight return). Tokyo accounts for only 1.7% of New York, and 2.1% of London opening-price variation. Similar patterns hold for volatility: we find larger mutual interdependence between New York and London and only marginal spillovers from Tokyo. Compared with earlier studies, we find that mutual linkages are more common and more significant. Results show that overnight foreign news might be a useful predictor of between 13 and 30% of domestic market price variation in these equity-trading centers. Similarly, high volatility days in major overseas markets, particularly when linked to negative returns shocks, point to a turbulent session in the coming day for the domestic market. Holders of internationally diversified portfolios can use such overnight information as a guide to portfolio rebalancing in the home market, or as a predictor of conditional volatility when reviewing risk-management. Overall, however, the extent of integration does not appear to eliminate advantages from international diversification, since the major proportion of domestic price variation remains unexplained.