Comovement in international equity markets: A sectoral view
AbstractWe investigate shifts in correlation patterns among international equity returns at the market level as well as the industry level. We develop a novel bivariate GARCH model for equity returns with a smoothly time- varying correlation and then derive a Lagrange Multiplier statistic to test the constant-correlation hypothesis directly. Applying the test to weekly data from Germany, Japan, the UK and the US in the period 1980- 2000, we find that correlations among the German, UK and US stock markets have doubled, whereas Japanese correlations have remained the same. Both dates of change and speeds of adjustment vary widely across countries and sectors.
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0310001.
Length: 28 pages
Date of creation: 01 Oct 2003
Date of revision:
Note: Type of Document - pdf; prepared on pc; to print on HP, A4 page format; pages: 28 ; figures: included. Final version, forthcoming in Journal of International Money and Finance
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stock market linkages; financial integration; smooth transition;
Other versions of this item:
- Berben, Robert-Paul & Jansen, W. Jos, 2005. "Comovement in international equity markets: A sectoral view," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 832-857, September.
- R-P. Berben & W.J. Jansen, 2001. "Comovement in International Equity Markets: a Sectoral View," MEB Series (discontinued) 2001-11, Netherlands Central Bank, Monetary and Economic Policy Department.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-CFN-2003-10-05 (Corporate Finance)
- NEP-ETS-2003-10-05 (Econometric Time Series)
- NEP-FMK-2003-10-05 (Financial Markets)
- NEP-RMG-2003-10-05 (Risk Management)
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