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spectral analysis, economic interdependence, New York, London, Tokyo, Pacific Basin, equity market
This paper analyzes the use of three dimensional spectral analyses. We highlight the power of this technique by examining the economic interrelationships between Pacific Basin countries, Tokyo, New York and London equity markets. To the best of our knowledge, no research in financial economics has ever employed the spectral technique with greater than two dimensions. Our use of three way spectral analysis, or partial coherence measures, allows us to ferret out the influence of correlated variables, in this case, major world markets (New York, London, Tokyo) before examining the relationship among the variables of primary interest, the Pacific Basin markets. WE hold constant the influence of New York, London, and Tokyo before examining the relationship among Pacific Basin Newly Industrialized countries equity indices to illustrate our methodology. Simulation techniques enable us to document the statistical power of our technique.
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