The International Crash of October 1987: Causality Tests

  title={The International Crash of October 1987: Causality Tests},
  author={A. G. Malliaris and Jorge Luis Urrutia},
  journal={Journal of Financial and Quantitative Analysis},
The paper analyzes lead-lag relationships for six major stock market indexes: New York S&P 500, Tokyo Nikkei, London FT–30, Hong Kong Hang Seng, Singapore Straits Times, and Australia All Ordinaries, for time periods before, during, and after the October 1987 market crash. Unidirectional and bidirectional causality tests are conducted by means of the Granger methodology. Practically no lead-lag relationships are found for the pre-crash and post-crash periods. However, important feedback… 

Tables from this paper

  • N. B. David
  • Economics
    Australian Journal of Business and Management Research
  • 2011
Investors tend to look into the possibility of broadening their investment activities across countries in order to diversify portfolio risk. This requires an understanding of regional and global
The international stock market crisis of 1997 and the dynamic relationships between Asian stock markets: linear and non‐linear Granger causality tests
Examines the dynamic relationships between stock markets in Japan, Hong Kong, Singapore, Malaysia, Taiwan and Thailand before, during and after the October 1997 crisis. Discusses linear and
Short-term and long-term price linkages between the equity markets of Australia and its major trading partners
This paper investigates the price linkages between the equity market of Australia and that of the US, UK, Japan, Hong Kong, Singapore, Taiwan, and Korea using weekly MSCI stock market data covering
Parametric and nonparametric Granger causality testing: Linkages between international stock markets
This study investigates long-term linear and nonlinear causal linkages among eleven stock markets, six industrialized markets and five emerging markets of South-East Asia. We cover the period
Common stochastic trends and the dynamic linkages driving european stock markets: evidence from pre- and post-october 1987 crash eras
Given the impact of the October 1987 crash pre-empting fears of a deep-seated financial collapse, there is now much scope for assessing its importance quantitatively. In this paper, time series
Causality Analysis Between Stock Market Indices
Summary The paper examines relationships between selected stock market indices in Western Europe, Central Europe, and the United States. The study focuses on two periods, from January 1998 to August
Interdependencies Among the Irish, British and German Stock Markets
Interdependencies between the Irish stock market and two other stock markets, namely the United Kingdom and Germany, are assessed. The indices used are the ISEQ, the FTSE-100, and the FAZ. The
Contagion Around the October 1987 Stock Market Crash
The results clearly show that the crash originated in the US market and that an upward movement in the Japanese market after the crash helped the recovery in theUS market, which has not yet been empirically documented in the literature.
Has 1997 Asian Crisis Increased Information Flows Between International Markets
The Asian crisis started on July 2, 1997 and caused turmoil in developed as well as emerging international stock markets. The objective of this paper is to analyse the movements and dynamic
International Transmission of Stock Price Movements among Taiwan and Its Trading Partners: Hong Kong, Japan and the United States
This study uses a cointegration analysis and vector autoregressive models to investigate the transmission of stock price movements among Taiwan and its major trading partners, Hong Kong, Japan and


The International Crash of October 1987
All major world markets declined substantially in October 1987-an exceptional occurrence, given the usual modest correlations of returns across countries. Of 23 markets, 19 declined more than 20 per
Comments on the Market Crash: Six Months After
Six months after the market crash of October 1987, we are still sifting through the debris searching for its cause. The most likely antecedent, very significant new news, is difficult to find. Most
Order Imbalances and Stock Price Movements on October 19 and 20, 1987
On October 19, 1987, NYSE stocks in the S&P index declined seven percentage points more than NYSE stocks not in this index. In the first hour of trading on October 20, the S&P stocks virtually
Small Sample Properties of Three Tests for Granger-Causal Ordering in a Bivariate Stochastic System
T HE purpose of this paper is to study the small sample performance of tests for causal ordering of time series in the sense of Granger (1969). Versions of three tests are studied: that based
Financial Markets and Monetary Economics
Financial Markets and Monetary Economics The October 1987 stock market crash, more than any other single event within recent years, has stimulated an extraordinary profusion of research on securities
Comparing alternative tests of causality in temporal systems: Analytic results and experimental evidence☆
Abstract This paper discusses eight alternative tests of the absence of casual ordering, all of which are asymptotically valid under the null hypothesis in the sense that their limiting size is
Investigating Causal Relations by Econometric Models and Cross-Spectral Methods
There occurs on some occasions a difficulty in deciding the direction of causality between two related variables and also whether or not feedback is occurring. Testable definitions of causality and
Causality in temporal systems: Characterization and a survey
A time series {Yt} ‘causes’ another time series {Yt}, in the sense defined by C.W.J. Granger, if present Y can be predicted better by using past values of X than by not doing so, other relevant
The Task Force Report: The Reasoning behind the Recommendations
T he aim of this article is to provide a framework for thinking about the recommendations made by the Presidential Task Force on Market Mechanisms. The Task Force made four broad recommendations: 1)
Small Sample Properties of Three Tests for Granger Causal Ordering
  • Journal of Economic Perspectives,
  • 1988