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Firm-Level Evidence on International Stock Market Comovement

  • Robin Brooks,
  • Marc Del Negro

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.

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File URL: https://www.ifw-members.ifw-kiel.de/publications/firm-level-evidence-on-international-stock-market-comovement/kap1244.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1244.

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Length: 30 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:kie:kieliw:1244
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  17. Robin Brooks & Marco Del Negro, 2002. "International diversification strategies," Working Paper 2002-23, Federal Reserve Bank of Atlanta.
  18. 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.
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