Aric Sethre

Date of Award

Spring 2018

Degree Name

Bachelor of Science (BS)

Advisor(s)

Kevin Mirabile

Abstract

The objective of this paper is to analyze the association between specific European, Asian, and North American-based equity markets’ reactions to global significant events. Although correlation of international stock markets and contagion from one market to both another market in the same asset class and other asset classes has been studied in the past, it is difficult to predict the reaction and further contagion of one market to the next after a certain event. By running several mean-differences tests, comparing post-event correlation between the specific domestic event countries to the pre-event world average as well as geographic regions and individual countries’ stock markets, we have been able to observe not only general historical correlation, but also observe changes in market correlations after a significant event. The significant domestic events we chose to investigate were the British Brexit, the American election of Donald Trump, and the Chinese debt fear, which all occurred in 2016. Specifically to our research design, we first compared correlations between the domestic countries to the average of all the countries from which we collected data (global average), all in order to see if there was a significant global reaction to the event. Then, we further compared correlations of the domestic countries to geographic groups (Asia, North America, and Europe), and finally ran our comparison test between the domestic country and individual countries in order to observe country-specific significant changes. In our results, we observed that for each significant event we chose to investigate, there was no significant reaction on a global basis. However, certain geographic regions along with a cluster of individual countries did have significant changes in correlation following the event.

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