Modelling spillover effects between the UK and the US stock markets over the period 1935–2020

This study investigates the spillovers of shocks and volatilities between the UK and the US stock markets over the period 1935–2020. The empirical analysis is carried out for the full sample and four subsample periods by applying the asymmetric GARCH-BEKK model. Based on the empirical results, the evidence indicates that financial market linkages between the two markets have become stronger since the commencement of the European Monetary Union (EMU), which suggests that stronger financial market interactions and interdependence could increase the vulnerabilities of domestic markets to any global shocks and reduce the potential benefits of portfolio diversification. This is an Accepted Manuscript of an article published by Taylor & Francis in Investment Analyst Journal on 26 June 2020, available online: http://www.tandfonline.com/10.1080/10293523.2020.1773143