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Correlation Between Markets: A Study on Correlation during different Market Conditions
Stockholm University, Faculty of Social Sciences, School of Business.
Stockholm University, Faculty of Social Sciences, School of Business.
2003 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

This paper examines the correlation between several large indices in the world with the OMX index. The research first determines whether correlation exists at all between the indices. After that, correlations between different market states are compared in order to determine if the correlation is higher during days when the return is good, poor or stable. We have collected a data sample from OMX, DAX, Nasdaq, Hang Seng, and Nikkei ranging between 01/19/1993-04/04/2003. The material has then been arranged in a descending order to capture days of extremely poor- or good return in the tails. Correlations have then been calculated and several hypotheses constructed to determine the significance of the correlation in different market states. Analysing the results we have found that strong correlation exists between all the tested indices and the OMX index. This is especially true between the DAX index and the OMX. We have also found significant proof that the correlation increases between the DAX, and the OMX indices in times of poor market return. This phenomenon can also be spotted between the Nasdaq and the OMX, although with less significance. The two Asian indices seem to experience a pattern that is different since the correlation seems to decrease in days of poor market return. Looking at days with good market return we have found that the DAX, Hang Seng, and Nikkei indices seems to experience a correlation that is higher than the correlation found in days of poor market return.

Place, publisher, year, edition, pages
2003.
National Category
Business Administration
Identifiers
URN: urn:nbn:se:su:diva-4220OAI: oai:DiVA.org:su-4220DiVA: diva2:193683
Uppsok
samhälle/juridik
Available from: 2007-01-05 Created: 2007-01-05

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