Munich Personal RePEc Archive

Who Leads Financial Markets?

Weber, Enzo (2007): Who Leads Financial Markets?

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Abstract

The present paper embarks on an analysis of interactions between the US and Euroland in the capital, foreign exchange, money and stock markets from 1994 until 2006. Estimating multivariate EGARCH processes for the structural financial innovations determines causality-in-variance effects and provides a solution to the simultaneity problem of identifying the contemporaneous impacts between the daily variables. Structural mean equations can therefore give answers to the question of financial markets leadership: Generally speaking, the US effects on Europe still dominate, but the special econometric methodology is able to uncover otherwise neglected spillovers in the reverse direction.

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