Correlation of Returns in Non-Contemporaneous Markets

14 Pages Posted: 5 May 1998

See all articles by Emel Kahya

Emel Kahya

Rutgers, The State University of New Jersey - Accounting

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Abstract

This article investigates the effects of non-overlapping trading hours on the correlations and cross-serial correlations of returns in non-contemporaneous stock markets and develops a simple formula for calculating contemporaneous correlation measures. The presence of these effects is illustrated empirically using stock market returns data for the U.S., Japan and the U.K. The results indicate that daily correlations of returns in these markets are biased downward while daily cross-serial correlations of returns are biased upwards. These findings have significant implications for studies investigating the transmission mechanism of stock price innovations across national stock markets and portfolio management.

JEL Classification: G12, F30

Suggested Citation

Kahya, Emel, Correlation of Returns in Non-Contemporaneous Markets. Available at SSRN: https://ssrn.com/abstract=83848 or http://dx.doi.org/10.2139/ssrn.83848

Emel Kahya (Contact Author)

Rutgers, The State University of New Jersey - Accounting ( email )

Camden, NJ 08102
United States
609-225-6594 (Phone)
609-225-6632 (Fax)

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