Time-varying International Effects of Japanese Stock Prices on US and Canadian Stock Markets

Abstract

This study investigates the international linkages of growth, value, and standard stock indices of the US, Canada, and Japan. In particular, we empirically test the international effects of Japanese standard, value, and growth stock indices on US and Canadian growth, value, and standard equity indices. Our empirical analyses by using multivariate-generalized autoregressive conditional heteroscedasticity (MGARCH) models suggest the following evidence. First, this paper clarifies that both the Nikkei 225 (the Nikkei) and the Tokyo stock price index (TOPIX) show the highest time-varying correlations with the US standard equity index, while both the Nikkei and TOPIX exhibit the highest time-varying correlations with the Canadian value index. Second, we further reveal that the Japanese value and growth stock indices also have the highest time-varying correlations with the US standard equity index, while both two Japanese indices show the highest time-varying correlations with the value index in Canada.