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International Stock Return Comovements

  • Geert Bekaert
  • Robert J. Hodrick
  • Xiaoyan Zhang

We examine international stock return comovements using country-industry and country-style portfolios. We first establish that parsimonious risk-based factor models capture the covariance structure of the data better than the popular Heston-Rouwenhorst (1994) model. We then establish the following stylized facts regarding stock return comovements. First, we do not find evidence for an upward trend in return correlations, excpet for the European stock markets. Second, the increasing imporatnce of industry factors relative to country factors was a short-lived, temporary phenomenon. Third, we find no evidence for a trend in idiosyncratic risk in any of the countries we examine.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11906.

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Date of creation: Dec 2005
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Publication status: published as Geert Bekaert & Robert J. Hodrick & Xiaoyan Zhang, 2009. "International Stock Return Comovements," Journal of Finance, American Finance Association, vol. 64(6), pages 2591-2626, December.
Handle: RePEc:nbr:nberwo:11906
Note: AP IFM
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