An Empirical Analysis Of Standard & Poor'S 500 Effect On International Stock Markets During 2007-2008

In order to measure American stock market effect on global stock markets during the U.S. financial crisis, using weekly-closing data of representative share price indices in 38 countries or regions from 2007 to 2008, this paper takes Standard & Poor's 500 as the proxy of American stock price level and investigates the relationships between S&P 500 and the others with the methods of Granger causality test and variance decomposition, respectively. The empirical results indicate that: (1) the global leadership of the U.S. stock market was greatly enhanced and international stock markets were shocked violently and synchronously since the financial crisis broke out, and (2) international stock markets volatility appeared similar geographically and economically. The authors argue that such features are rooted in the "core-periphery" architecture of economical and financial globalization.