This paper examines the spill-overs in both returns and volatility between the London and New York stock markets during overlapping trading hours. Using high-frequency data for the FTSE and S&P stock index futures, we estimate the seasonal patterns in volatility using a Flexible Fourier Form specification. The estimated seasonals are used to adjust the returns before conducting the lead-lag analysis. The results indicate that both markets influence each other, although the impact of the USA on the UK is clearly stronger.
Interaction between stock markets: an analysis of the common trading hours at the London and New York stock exchange