The question for this thesis is whether the four major stock markets--the United States, Great Britain, West Germany, and Japan are interdependent or segmented. The study period runs from February 1979 to June 1987, with the Wall Street Journal as a source of data. The Granger causality test is used to test for relationships among the four major stock markets. The thesis is divided into five chapters-- 1) statement of the problem; 2) survey of literature; 3) methodology; 4) results and 5) conclusions. The overall findings of this thesis indicate that there are few or no comovement similarities among all the four stock markets. However, the findings do point out the significant influence of the United States stock market on the other three stock markets.

When a stock is added into the S&P 500 Index, it is automatically "cross-listed" in the index derivative markets (i.e., S&P 500 Index futures and Index options). I examined the effects of such cross-listing on the trading volume and return volatility of the underlying component stocks. Traditional finance theory asserts that futures and "cash" markets are connected by arbitrage mechanism that brings both markets to equilibrium. When arbitrage opportunities arise, arbitrageurs buy (sell) the index portfolio and take short (long) positions in the corresponding index derivative contracts until prices return to theoretical levels. Such mechanical arbitrage trading tends to create large order flows that could be difficult for the market to absorb, resulting in price changes. Utilizing a list of S&P 500 index composition changes occurring over the period September 1976 to December 2005, I investigated the market-adjusted volume turnover ratios and return variances of the stocks being added to and deleted from the S&P 500, surrounding the effective day of index membership changes. My primary finding is that, after the introduction of the S&P 500 index futures and options contracts, stocks added to the S&P 500 experience significant increase in both trading volume and return volatility. However, deleted stocks experience no significant change in either trading volume or return volatility. Both daily and monthly return variances increase following index inclusion, consistent with the hypothesis that derivative transactions "fundamentally" destabilize the underlying securities. I argue that the increase in trading volume and return volatility may be attributed to index arbitrage transactions as derivative markets provide more routes for index arbitrageurs to trade. Other index trading strategies such as portfolio insurance and program trading may also contribute to the results. On the other hand, a deleted stock is not associated with changes in trading volume and volatility since it represents an extremely small fraction of the market value-weighted index portfolio, and the influence of index trading strategies becomes slight for these shares. Furthermore, evidence is provided that trading volume and return volatility are positively related.

by Leung Chui-wa. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1995. / Includes bibliographical references (leaves 72-75). / ABSTRACT --- p.ii / TABLE OF CONTENTS --- p.iii / LIST OF TABLES --- p.v / ACKNOWLEDGEMENT --- p.vii / Chapters / Chapter I. --- introduction --- p.1 / Purpose of the project --- p.2 / Scope of the project --- p.2 / Methodology and literature review --- p.2 / Chapter II. --- BACKGROUND OF OFFSHORE LISTING OF CHINA ENTERPRISES --- p.5 / Reform of China state-owned enterprise --- p.5 / Development of China securities market --- p.8 / Capital needs of China --- p.11 / China's participation in global economy --- p.12 / China's resumption of Hong Kong's sovereignty --- p.13 / Chapter III --- OVERVIEW OF OFFSHORE LISTING OF CHINA ENTERPRISES.…… --- p.15 / China policies over offshore listings of China enterprises --- p.15 / Overall policy --- p.16 / Selection of State-owned enterprises for offshore listings --- p.17 / Selection of listing venue --- p.19 / Competition among stock exchanges worldwide --- p.20 / Australia --- p.21 / Canada --- p.22 / London --- p.22 / Singapore --- p.23 / Tokyo --- p.24 / Chapter IV. --- listings of china enterprises in hong kong and the united states --- p.26 / Current situation in Hong Kong and New York --- p.26 / China enterprises listed in Hong Kong and New York --- p.28 / Hong Kong --- p.28 / New York --- p.30 / Important issues for consideration --- p.32 / Regulatory regime --- p.32 / Offering mechanism --- p.35 / Market characteristics --- p.38 / Advantages and disadvantages of listing in Hong Kong and the US --- p.39 / Chapter V. --- trading performance of h shares and h/n share adrs … --- p.41 / Scope and methodology of the analysis --- p.41 / Findings --- p.42 / Discussion --- p.45 / Chapter VI. --- discussion and conclusion --- p.47 / Implications on SOEs and China economy --- p.47 / Implications on the Hong Kong stock market --- p.50 / appendix --- p.54 / bibliography --- p.72