Comment on 'Price Volatility and Volume Spillovers Between the Tokyo and New York Stock Markets

1994| Working Paper No. 1288

The paper by Takatoshi Ito and Weng-Ling Lin (henceforth IL) falls in the general category of market microstructure, which includes the structure of markets, the causes of transaction to transaction price movements, and the way in which information from diverse individuals is aggregated into market prices. The paper makes two main contributions. First, it adds to the growing literature that exploits the potential information in the market behavior of assets that are traded in different international markets, but that are identical or at least very similar. IL examine the behavior of broad market indices in Japan and the United States, namely the Nikkei 225 index from the Tokyo Stock Exchange and the S&P 500 index from the NYSE._x000B__x000B_Second, IL provide detailed statistics on price and volume in these markets, including mutual statistical dependencies. Overnight and daytime returns for several time periods are examined, as are some intraday (hourly) returns during the Crash of October 1987. In general the statistical analysis is thorough and reliable, although the robustness of large sample test statistics for the current application is a potential issue._x000B__x000B_