Advanced Search
MyIDEAS: Login to save this paper or follow this series

Firm-Level Evidence on International Stock Market Comovement

Contents:

Author Info

  • Robin Brooks,
  • Marc Del Negro

Abstract

We explore the link between international stock market comovement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in 20 countries, we estimate a factor model that decomposes stock returns into global, country-specific and industry-specific shocks. We find a large and highly significant link: on average, a firm raising its international sales by 10 percent raises the exposure of its stock return to global shocks by 2 percent and reduces its exposure to countryspecific shocks by 1.5 percent. This link has grown stronger since the mid-1980s.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: https://www.ifw-members.ifw-kiel.de/publications/firm-level-evidence-on-international-stock-market-comovement/kap1244.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1244.

as in new window
Length: 30 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:kie:kieliw:1244

Contact details of provider:
Postal: Kiellinie 66, D-24105 Kiel
Phone: +49 431 8814-1
Fax: +49 431 85853
Email:
Web page: http://www.ifw-kiel.de
More information through EDIRC

Related research

Keywords: Diversification; risk; international financial markets; industrial structure;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Stockman, Alan C., 1988. "Sectoral and national aggregate disturbances to industrial output in seven European countries," Journal of Monetary Economics, Elsevier, Elsevier, vol. 21(2-3), pages 387-409.
  2. Falko Fecht & Kevin Huang & Antoine Martin, 2004. "Financial intermediaries, markets, and growth," Research Working Paper, Federal Reserve Bank of Kansas City RWP 04-02, Federal Reserve Bank of Kansas City.
  3. Philip Lane & Gian Maria Milesi-Ferretti, 2001. "THE EXTERNAL WEALTH OF NATIONS: Measures of Foreign Assets and Liabilities For Industrial and Developing Countries," CEG Working Papers, Trinity College Dublin, Department of Economics 20012, Trinity College Dublin, Department of Economics.
  4. Robin Brooks & Marco Del Negro, 2002. "The rise in comovement across national stock markets: market integration or IT bubble?," Working Paper, Federal Reserve Bank of Atlanta 2002-17, Federal Reserve Bank of Atlanta.
  5. Forbes, Kristin & Chinn, Menzie, 2003. "A Decomposition of Global Linkages in Financial Markets over Time," Santa Cruz Department of Economics, Working Paper Series qt6z74b3x7, Department of Economics, UC Santa Cruz.
  6. Ferson, Wayne E. & Harvey, Campbell R., 1994. "Sources of risk and expected returns in global equity markets," Journal of Banking & Finance, Elsevier, Elsevier, vol. 18(4), pages 775-803, September.
  7. Dumas, Bernard & Solnik, Bruno, 1995. " The World Price of Foreign Exchange Risk," Journal of Finance, American Finance Association, American Finance Association, vol. 50(2), pages 445-79, June.
  8. John M. Griffin & G. Andrew Karolyi, . "Another Look at the Role of the Industrial Structure of Markets for International Diversification Strategies," Research in Financial Economics, Ohio State University 9608, Ohio State University.
  9. De Santis, Giorgio & Gerard, Bruno, 1997. " International Asset Pricing and Portfolio Diversification with Time-Varying Risk," Journal of Finance, American Finance Association, American Finance Association, vol. 52(5), pages 1881-1912, December.
  10. Kathryn M.E Dominguez & Linda L. Tesar, 2000. "Trade and Exposure," Working Papers, Research Seminar in International Economics, University of Michigan 466, Research Seminar in International Economics, University of Michigan.
  11. Robin Brooks & Marco Del Negro, 2002. "International diversification strategies," Working Paper, Federal Reserve Bank of Atlanta 2002-23, Federal Reserve Bank of Atlanta.
  12. Heston, Steven L. & Rouwenhorst, K. Geert, 1994. "Does industrial structure explain the benefits of international diversification?," Journal of Financial Economics, Elsevier, Elsevier, vol. 36(1), pages 3-27, August.
  13. Griffin, John M & Stulz, Rene M, 2001. "International Competition and Exchange Rate Shocks: A Cross-Country Industry Analysis of Stock Returns," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 14(1), pages 215-41.
  14. Lane, Philip & Milesi-Ferretti, Gian Maria, . "External Wealth of Nations," Instructional Stata datasets for econometrics extwealth, Boston College Department of Economics.
  15. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
  16. Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(3), pages 607-36, May-June.
  17. Hamerle, Alfred & Liebig, Thilo & Scheule, Harald, 2004. "Forecasting Credit Portfolio Risk," Discussion Paper Series 2: Banking and Financial Studies 2004,01, Deutsche Bundesbank, Research Centre.
  18. Menzie D. Chinn & Hiro Ito, 2002. "Capital Account Liberalization, Institutions and Financial Development: Cross Country Evidence," NBER Working Papers 8967, National Bureau of Economic Research, Inc.
  19. Bruce N. Lehmann & David M. Modest, 1985. "The Empirical Foundations of the Arbitrage Pricing Theory I: The Empirical Tests," NBER Working Papers 1725, National Bureau of Economic Research, Inc.
  20. Heston, Steven L. & Rouwenhorst, K. Geert & Wessels, Roberto E., 1995. "The structure of international stock returns and the integration of capital markets," Journal of Empirical Finance, Elsevier, Elsevier, vol. 2(3), pages 173-197, September.
  21. Cho, D Chinhyung & Eun, Cheol S & Senbet, Lemma W, 1986. " International Arbitrage Pricing Theory: An Empirical Investigation," Journal of Finance, American Finance Association, American Finance Association, vol. 41(2), pages 313-29, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Rua, António & Nunes, Luís C., 2009. "International comovement of stock market returns: A wavelet analysis," Journal of Empirical Finance, Elsevier, Elsevier, vol. 16(4), pages 632-639, September.
  2. Baele, Lieven & Inghelbrecht, Koen, 2009. "Time-varying Integration and International diversification strategies," Journal of Empirical Finance, Elsevier, Elsevier, vol. 16(3), pages 368-387, June.
  3. Fang Cai & Francis E. Warnock, 2006. "International Diversification at Home and Abroad," NBER Working Papers 12220, National Bureau of Economic Research, Inc.
  4. Cai, Fang & Warnock, Francis E., 2012. "Foreign exposure through domestic equities," Finance Research Letters, Elsevier, Elsevier, vol. 9(1), pages 8-20.
  5. Lupu, Radu, 2011. "Shock transmission among the European Stock markets - Conferinta CRESTERE ECONOMICA SI SUSTENABILITATE SOCIALA. PROVOCARI SI PERSPECTIVE EUROPENE>," Institute for Economic Forecasting Conference Proceedings, Institute for Economic Forecasting 101101, Institute for Economic Forecasting.
  6. Geert Bekaert & Michael Ehrmann & Marcel Fratzscher & Arnaud Mehl, 2014. "The Global Crisis and Equity Market Contagion," Discussion Papers of DIW Berlin 1352, DIW Berlin, German Institute for Economic Research.
  7. Thomas Nitschka, 2007. "International evidence for return predictability and the implications for long-run covariation of the G7 stock markets," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 338, Institute for Empirical Research in Economics - University of Zurich.
  8. Jian Zhou & Yanmin Gao, 2012. "Tail Dependence in International Real Estate Securities Markets," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 45(1), pages 128-151, June.
  9. Rodrigo Aranda & Patricio Jaramillo, 2008. "Nonlinear Dynamic in the Chilean Stock Market: Evidence from Returns and Trading Volume," Working Papers Central Bank of Chile, Central Bank of Chile 463, Central Bank of Chile.
  10. Cai, Fang & Warnock, Francis E., 2005. "International diversification at home and abroad," Discussion Paper Series 1: Economic Studies 2005,06, Deutsche Bundesbank, Research Centre.
  11. John Ammer & Jon Wongswan, 2004. "Cash flows and discount rates, industry and country effects, and co-movement in stock returns," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 818, Board of Governors of the Federal Reserve System (U.S.).
  12. Bai, Ye & Green, Christopher J. & Leger, Lawrence, 2012. "Industry and country factors in emerging market returns: Did the Asian crisis make a difference?," Emerging Markets Review, Elsevier, Elsevier, vol. 13(4), pages 559-580.
  13. Lieven Moor & Piet Sercu, 2010. "Country v sector effects in equity returns and the roles of geographical and firm-size coverage," Small Business Economics, Springer, Springer, vol. 35(4), pages 433-448, November.
  14. Moshirian, Fariborz & Nguyen, Huong Giang (Lily) & Pham, Peter Kien, 2012. "Overnight public information, order placement, and price discovery during the pre-opening period," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(10), pages 2837-2851.
  15. Aloui, Chaker & Hkiri, Besma, 2014. "Co-movements of GCC emerging stock markets: New evidence from wavelet coherence analysis," Economic Modelling, Elsevier, Elsevier, vol. 36(C), pages 421-431.
  16. Nitschka, Thomas, 2006. "The U.S. consumption-wealth ratio and foreign stock markets: International evidence for return predictability," Technical Reports 2006,11, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
  17. Nikolaos L. Hourvouliades, 2009. "International Portfolio Diversification: Evidence from European Emerging Markets," European Research Studies Journal, European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 55-78.
  18. De Moor, Lieven & Sercu, Piet, 2011. "Country versus sector factors in equity returns: The roles of non-unit exposures," Journal of Empirical Finance, Elsevier, Elsevier, vol. 18(1), pages 64-77, January.
  19. Cerqueti, Roy & Costantini, Mauro, 2011. "Testing for rational bubbles in the presence of structural breaks: Evidence from nonstationary panels," Journal of Banking & Finance, Elsevier, Elsevier, vol. 35(10), pages 2598-2605, October.
  20. Rodrigo F. Aranda L. & Patricio Jaramillo G., 2010. "Non-linear Dynamics in the Chilean Stock Market: Evidence on Traded Volumes and Returns," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, Central Bank of Chile, vol. 13(3), pages 67-94, December.
  21. Nikola Gradojević & Eldin Dobardžić, 2013. "Causality between Regional Stock Markets: A Frequency Domain Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(5), pages 633-647, September.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:kie:kieliw:1244. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.