The Connection of Stock Markets Between Germany and the USA: New Evidence From a Co-integration Study

Arbeitspapier

This paper uses an empirical connection between real stock market indices of Germany and the USA for forecasting corresponding returns. We are starting from the random walk as the traditional forecasting model in stock market applications, extending it by co-integration. Since the cointegrating relation considers information about a systematic link between the stock market indices, containing a common stochastic trend of both, differences from the random walk occur particularly in the long run. Thus, the estimation period shows that with increasing forecasting horizon predictability of simple real returns of the German stock market gets more accurate than reflected traditionally.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 03-36

Classification and Topics

• Classification: Wirtschaft ; Financial Aspects of Economic Integration ; Forecasting Models; Simulation Methods ; Model Evaluation, Validation, and Selection ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: Co-integration of international stock markets ; random walk ; discretely and continuously compounded returns ; impulse responses ; Börsenkurs ; Aktienmarkt ; Aktienindex ; Internationaler Preiszusammenhang ; Schätzung ; Deutschland ; Vereinigte Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Eberts, Elke
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/23972
• Last update: 10.03.2025, 11:41 AM CET