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Comovement in international equity markets: A sectoral view

  • Robert-Paul Berben

    (De Nederlandsche Bank)

  • W. Jos Jansen

    (De Nederlandsche Bank)

We investigate shifts in correlation patterns among international equity returns at the market level as well as the industry level. We develop a novel bivariate GARCH model for equity returns with a smoothly time- varying correlation and then derive a Lagrange Multiplier statistic to test the constant-correlation hypothesis directly. Applying the test to weekly data from Germany, Japan, the UK and the US in the period 1980- 2000, we find that correlations among the German, UK and US stock markets have doubled, whereas Japanese correlations have remained the same. Both dates of change and speeds of adjustment vary widely across countries and sectors.

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File URL: http://128.118.178.162/eps/fin/papers/0310/0310001.pdf
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Paper provided by EconWPA in its series Finance with number 0310001.

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Length: 28 pages
Date of creation: 01 Oct 2003
Date of revision:
Handle: RePEc:wpa:wuwpfi:0310001
Note: Type of Document - pdf; prepared on pc; to print on HP, A4 page format; pages: 28 ; figures: included. Final version, forthcoming in Journal of International Money and Finance
Contact details of provider: Web page: http://128.118.178.162

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