Abstract
This paper investigates the intraday pricing linkage between S&P and non-S&P portfolios of stocks traded on the New York Stock Exchange for the market crashes of October 1987 and October 1989. The two portfolios consist of public utility stocks constructed with a technique known as pairing. The paper finds evidence that minute-by-minute prices for the S&P and non-S&P portfolios are cointegrated for both market disturbances. These results suggest that the pricing linkage between the two sets of stocks is maintained during periods of extreme stock market stress. The paper also finds evidence that the lead-lag relationship between the S&P and non-S&P portfolio prices is sensitive to changes in trading costs.
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