Stock market integration between the UK and the US: Evidence over eight decades

Olalekan Aladesanmi , Fabrizio Casalin (1) , Hugh Metcalf

1 LEM - Lille économie management - UMR 9221

This study investigates how the impact made on stock market integration by macroeconomic determinants such as various measures of convergence and financial volatility, as well as crisis episodes, varies over the period 1935–2015. We gauge how the level of integration between the UK and US stock markets changes across three monetary regimes during this period: pre–Bretton Woods (BW), the BW fixed exchange rate, and the post-BW flexible rates. Our empirical results suggest that integration was strongest under the post-BW regime and weakest under the BW regime. We further demonstrate that stock market integration between the two markets has been driven largely by macroeconomic convergence and financial volatility as well as by crises, especially since the demise of the BW system.

Mots clés: Stock market integration Bretton Woods Economic policy uncertainty index Co-integration Multivariate GARCH

Domaines: Sciences de l'Homme et Société; Economies et finances

Olalekan Aladesanmi, Fabrizio Casalin, Hugh Metcalf. Stock market integration between the UK and the US: Evidence over eight decades. Global Finance Journal, In press, 41, pp.32-43. ⟨10.1016/j.gfj.2018.11.005⟩. ⟨hal-02108134⟩