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Li Li was a summer intern in the Research Department when much of the empirical work in the paper was completed. Zuliu F. Hu is now with Goldman Sachs, Hong Kong. The authors thank Peter Wickham for extensive comments.
Although the daily changes in the various stock price indexes are highly correlated, the OLS estimates are as efficient as the estimates from a seemingly unrelated regression (SUR) procedure, because the set of independent variables is identical in each equation.