Stock Market Integration and the Speed of Information Transmission

Using a unique dataset covering two years of high frequency data on the indices from markets in the U. S., London, Frankfurt, Paris, Warsaw, Prague, and Budapest, we perform cointegration and Granger causality tests with data of different frequencies (from 5 minutes to 1 day). The aim is to describe the time structure in which markets react to the information revealed in prices on other markets. The results suggest that the speed of information transmission is very fast. In all cases the strongest reaction occurs within 1 hour. Therefore, the use of daily data may be misleading when analyzing the issues of stock market integration and information transmission between markets.