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International comovement of stock market returns: a wavelet analysis

  • António Rua
  • Luís Catela Nunes

The assessment of the comovement among international stock markets is of key interest, for example, for the international portfolio diversification literature. In this paper, we re-examine such comovement by resorting to a novel approach, wavelet analysis. Wavelet analysis allows one to measure the comovement in the time-frequency space. In this way, one can characterize how international stock returns relate in the time and frequency domains simultaneously, which allows one to provide a richer analysis of the comovement. We focus on Germany, Japan, UK and US and the analysis is done at both the aggregate and sectoral levels.

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File URL: http://www.bportugal.pt/en-US/BdP%20Publications%20Research/WP200904.pdf
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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w200904.

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Date of creation: 2009
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Handle: RePEc:ptu:wpaper:w200904
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