Long-term relationships between international share prices

This paper considers whether there are any long-term statistical relationships between the prices of shares on different national stock markets. A review of the institutional and technological changes which occurred in the early 1980s suggests that, while such relationships were unlikely before 1980, markets are now expected to move together. Using monthly share price data for 17 major exchanges over the period 1970:1–1989:2, tests for the presence of unit roots are conducted and share prices are found to be integrated of order one. When the data are split for the periods 1970:1–1979:12 and 1984:1–1989:2, corresponding to before and after the development of global markets, there is some evidence of long-term relationships in the later period.