Correlation between the Nikkei and the

Figure 10.27 illustrates the strong correlation between the Japanese stock index (the Nikkei 225) and the Dow Jones Industrial Average. Since 2000, the price patterns of these two indexes have mirrored each other, and a closer look at the chart shows that the moves in the Nikkei can sometimes be far more exaggerated than the moves in the Dow (please bear in mind that these two indexes have not been normalized in the chart). More important, it should be clear there are times when the Nikkei rises or falls before the Dow and times when the Dow leads a move in the Nikkei. Correlations

Japanese Nlkkel 225 Index vs. Dow Jones Industrial Average 2000-2008

Japanese Nlkkel 225 Index vs. Dow Jones Industrial Average 2000-2008

Japanese Nikkei 225 Index (lhs) Dow Jones Industrial Average (rhs)

2000

2002

2004

2006

2008

figure 10.27 The Nikkei 225 and the Dow Jones Industrial Average o o o

Japanese Nikkei 225 Index (lhs) Dow Jones Industrial Average (rhs)

2000

2002

2004

2006

2008

figure 10.27 The Nikkei 225 and the Dow Jones Industrial Average between global stock market indexes are nothing new and not unique to just the United States and Japan.

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