Equity Price Dynamics Before and After the Introduction of the Euro

Daily data from the German and U.S. equity markets before and after
the introduction of the Euro are used to study the effect of
exchange rate regime choices on equity markets. It is found that,
since the introduction of the Euro, the volatility and the
persistence of the German stock index have fallen significantly
relative to those of the U.S. index. However, the switch in
exchange rate arrangement appears to have no significant
implication for the causal relationships - both the mean and
varianc causalities - between the two equity markets.