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International Stock Return Comovements

Listed author(s):
  • GEERT BEKAERT
  • ROBERT J. HODRICK
  • XIAOYAN ZHANG

We examine international stock return comovements using country-industry and country-style portfolios as the base portfolios. We first establish that parsimonious risk-based factor models capture the data covariance structure better than the popular Heston-Rouwenhorst (1994) model. We then establish the following stylized facts regarding stock return comovements. First, there is no evidence for an upward trend in return correlations, except for the European stock markets. Second, the increasing importance of industry factors relative to country factors was a short-lived phenomenon. Third, large growth stocks are more correlated across countries than are small value stocks, and the difference has increased over time. Copyright (c) 2009 the American Finance Association.

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Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 64 (2009)
Issue (Month): 6 (December)
Pages: 2591-2626

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Handle: RePEc:bla:jfinan:v:64:y:2009:i:6:p:2591-2626
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