Regularities in the data between major equity markets: evidence from Granger causality tests

Abstract

Weekly returns from markets in the US, Great Britain, West Germany and Japan are subjected to bivariate causality tests during the period 17 January 1979 to 26 June 1991. We find evidence of Granger unidirectional causality running from the US to the other countries immediately after the October 1987 world-wide crash. These episodes are brief, with the exception of the linkage from the US to the German market. Also presented is evidence of brief periods of causality running from the other markets to the US.