A DUAL APPROACH TO MEASURING EQUITY MARKET INTERRELATIONSHIPS

Abstract

This paper incorporates both mean returns and volatility effects in investigating relationships between and among international equity markets. As proxies for world equity markets, the US, Germany, and Japan are selected to represent their respective regions o f the world. The more significant findings include: returns causalities are stronger than volatilities causalities, unconditional volatility (measured as rolling standard deviation ofreturns) affects returns more than conditional volatility (measured by GARCH effects).