This paper examines the issue of mean and variance causality across four equities
markets using daily data for the period 1996-2002. We apply the testing procedure
developed by Cheung and Ng (1996) in order to test for mean and variance spillovers.
The main findings are: (i) In contrast to the findings of previous studies, EGARCH-M
processes characterize each stock returns series in all markets; (ii) There is substantial
evidence of causality in both mean and variance with the causality in mean largely
being driven by the causality in variance; and (iii) The results indicate the stock
markets of Athens, London and New York are the major exporters of causality and
the stock market of Cyprus is an importer of causality.
01/01/2005
myEcon Newsletter
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