International stock market comovements: what happened during the financial crisis?
We investigate the stock market comovements in Australia, Brazil, Canada, China, Germany, Hong Kong, Japan, Russia, South Africa, the UK, and the USA, both at the market and sectoral level in 2000-2010. Using multivariate GARCH models, our results suggest that the correlation among equity returns during the financial crisis (2008-2010) somewhat increased suggesting that the crisis represented a common shock to all countries. The U.S. stock market is found to be the most correlated with the stock markets in Brazil, Canada and UK. The correlation of U.S. and Chinese stock market is esentially zero before the crisis; it becomes slightly positive during the crisis. The sectoral indices are less correlated than the market indices over the whole period, but again the correlations increase during the crisis.
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