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The Relationship Between International Equity Market Behaviour and the JSE

This paper investigates empirically the relationship between domestic and international market returns and volatilities, using the London Stock Exchange as the international market proxy. In order to address problems of widely differing bourse composition, the relationships are tested at both the broad bourse index level and the sectoral sub-indices level. The paper finds significant evidence of a positive relationship between foreign returns and domestic returns and, in addition, between foreign volatility and domestic volatility. It is found that, for most sectors, the main association period is during the same concurrent trading day, although there are additional significant lags present in most of the series. Strong evidence is also found that the magnitude of volatility on the JSE and most of its sub-indices reacts far more to negative shocks than it does to positive shocks.

Working Paper 042
1 September 2006
Related Journal

2006, South African Journal of Economics, 74(2), 248-60
SHARE THIS Working Paper PUBLICATION:
19 September 2012
Publication Type: Working Paper
JEL Code: F36, G15

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