Working Paper: CEPR ID: DP307
Authors: Elisabetta Bertero; Colin Mayer
Abstract: This paper uses a new data source on share prices to examine how stock markets in 23 countries reacted to the crash of October 1987. It records substantial variations across countries. In general there is no evidence that these differences are related to the structure of markets. However, trading halts and capital controls on residents may have moderated the speed of dealings in some markets. The interrelation between markets is examined before, during and after the crash. The paper reports high correlations between certain groups of countries prior to the crash. However, during the week of the crash the influence of the leading markets became more pronounced.
Keywords: stock market crash; linkages between markets
JEL Codes: G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Crash (G01) | Market correlations (G19) |
| Circuit breakers present (L94) | Market decline (G19) |
| Capital controls on domestic residents (F38) | Market decline (G19) |
| Capital controls on foreign investments (F38) | Market performance (G10) |