The Stock Return Comovements: A Study of the European and the Japanese Equity Markets

Abstract

In this paper, the time-series developments of covariations of returns between the Japanese stock markets and the European stock markets are empirically examined. We analyze these comovements by dividing sample periods into several terms that are before and after the Lehman Shock in the US. In this study, it is firstly clarified that the linkage of stock returns of the Japanese markets and the European markets recently gradually increased. Moreover, it is secondly identified that in the period right after the US Lehman Shock, the covariations between stock returns in Japan and in several European countries highly increased.