IDEAS home Printed from https://ideas.repec.org/a/gam/jrisks/v13y2025i6p110-d1672718.html
   My bibliography  Save this article

Stock Returns’ Co-Movement: A Spatial Model with Convex Combination of Connectivity Matrices

Author

Listed:
  • Nadia Ben Abdallah

    (Department of Finance, Higher Institute of Management, University of Sousse, Sousse BN1 9RH, Tunisia)

  • Halim Dabbou

    (Department of Administration, Hearst University, Campus of Timmins, Timmins, ON P0L 1N0, Canada)

  • Mohamed Imen Gallali

    (Laboratory of Research in Innovative Management, Risk, Accounting and Finance, University of Manouba, Manouba LR21ES29, Tunisia)

  • Salem Hathroubi

    (Department of Economics, College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh 11564, Saudi Arabia)

Abstract

This paper examines the extent of stock-returns’ co-movements among firms in different countries and explores how various measures of closeness affect those co-movements by estimating a spatial autoregressive (SAR) convex combination model that merges four weight matrices—geographical distance, bilateral trade, sector similarity, and company size—into one global matrix. Our results reveal strong spatial stock-market dependence, show that spatial proximity is better captured by financial-distance measures than by pure geographical distance, and indicate that the weight matrix based on sector similarities outperforms the other linkages in explaining firms’ co-movements. Extending the traditional SAR model, the study simultaneously evaluated cross-country and within-country dependencies, providing insights valuable to investors building optimal portfolios and to policymakers monitoring contagion and systemic risk.

Suggested Citation

  • Nadia Ben Abdallah & Halim Dabbou & Mohamed Imen Gallali & Salem Hathroubi, 2025. "Stock Returns’ Co-Movement: A Spatial Model with Convex Combination of Connectivity Matrices," Risks, MDPI, vol. 13(6), pages 1-19, June.
    • Handle: RePEc:gam:jrisks:v:13:y:2025:i:6:p:110-:d:1672718
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-9091/13/6/110/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-9091/13/6/110/
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jrisks:v:13:y:2025:i:6:p:110-:d:1672718. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.