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Firm-level evidence on international stock market movement

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Abstract

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 twenty countries, we estimate a factor model that decomposes stock returns into global, country- and industry-specific shocks. We find a large and highly significant link: 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 country-specific shocks by 1.5 percent. This link has grown stronger over time since the mid-1980s.

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  • Robin Brooks & Marco Del Negro, 2003. "Firm-level evidence on international stock market movement," FRB Atlanta Working Paper 2003-8, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:2003-8
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    More about this item

    Keywords

    Financial markets; International finance; Risk;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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