Pergamon Journal of International Money and Finance, Vol. 15, No. 3, pp. 447-465, 1996 Copyright © 1996 Elsevier Science Ltd Printed in Great Britain. All rights reserved S0261-5606(96)00011-3 0261-5606/96 $15.00 + 0.00 The international transmission of information in Eurodollar futures markets: a continuously trading market hypothesis YIUMAN TSE* Department of Finance, Insurance, and Real Estate, The Universityof Memphis, Memphis TN 38152, USA TAE-HWY LEE Department of Economics, Universityof California, Riverside, Riverside CA 92521-0427, USA AND G GEOFFREY BOOTH Department of Finance, Louisana State University, Baton Rouge LA 70803, USA This paper studies the transmission of information in three Eurodollar futures markets, the IMM, SIMEX and LIFFE. The results show that relevant information is revealed during the trading hours of the IMM and LIFFE, but not the SIMEX. The interest rates of the three markets are cointegrated with a single common stochastic trend. Granger-causality runs from the market that is placed in the last trading order within 24 hours in the vector error correction model and this causal relationship is shorter than one day. An approach of variance decomposition and im- pulse response functions exploring the common factor in the cointegra- tion system is employed. Analogous to the causality results, the common factor is driven by the last trading market in the 24-hour trading se- quence. Specifically, each market, while it is trading, impounds all the information and rides on the common stochastic trend. The overall results suggest that these three markets can be considered one continuously trading market. (JEL G15, C32). Copyright © 1996 Elsevier Science Ltd * We would like to thank an anonymous referee, Bill Lane, Gary Sanger and Myron Slovin for useful comments. This research started while Yiuman Tse and Tae-Hwy Lee were at Louisiana State University. 447