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Cross-Country Stock Market Comovement: A Macro Perspective

Author

Listed:
  • Anagnostopoulos, Alexios
  • Atesagaoglu, Orhan Erem
  • Faraglia, Elisa
  • Giannitsarou, Chryssi

Abstract

Since the 1990s, there has been a simultaneous rise in cross-country stock market correlations and FDI positions. We establish an empirical relationship between these two, for pairs of developed economies that survives controlling for relevant factors. At firm level, we find that stock returns of multinationals that invest in technology capital are more correlated with world stock markets. Using a calibrated two-country asset pricing model with multinationals, we find that the increase in FDI accounts for one third of the rise in the observed stock market correlations. When allowing for increases in trade and portfolio diversification, we find that these two factors do not generate an increase in stock market correlations.

Suggested Citation

  • Anagnostopoulos, Alexios & Atesagaoglu, Orhan Erem & Faraglia, Elisa & Giannitsarou, Chryssi, 2022. "Cross-Country Stock Market Comovement: A Macro Perspective," CEPR Discussion Papers 16021, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16021
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    Cited by:

    1. is not listed on IDEAS
    2. Richard C. K. Burdekin & Ran Tao, 2025. "Chinese vs. US Stock Market Transmission to Australasia, Hong Kong, and the ASEAN Group," JRFM, MDPI, vol. 18(3), pages 1-23, March.

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    Keywords

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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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