The relationship between daily U.S. and Japanese equity prices: Evidence from spot versus futures markets

Abstract

The daily and overnight transmission of equity prices between the U.S. and Japan is examined in this paper. This study documents that the use of the opening value of an equity index to represent equity prices at the open is unlikely to be reliable and the calculated opening values of the Nikkei 225 and (especially) the S&P500 indexes mostly reflect prior days closing prices. Unlike prior studies, this paper accounts for this problem of non-synchronous trading at the open and finds that U.S. equity prices do not lead Japanese equity prices as both U.S. and Japanese opening equity prices reflect overnight price changes in the other market. © 1994.