SUPEREXOGENEITY AND THE DYNAMIC LINKAGES AMONG INTERNATIONAL EQUITY MARKETS

In this article, we combine the Johansen procedure for cointegration t esting with tests of weak exogeneity and invariance in order to ascert ain whether a system of equity markets is characterized by superexogen eity. Superexogeneity is rejected for the system comprised of stock in dices of the US, UK, Germany and Japan. This finding implies that agen ts participating in these financial markets are forward looking, all m arkets are endogenous in our system and the assumption of stability of the asset demand function is questionable. (C) 1998 Elsevier Science Ltd. All rights reserved.