Firm-Level Evidence on International Stock Market Comovement

FRB of Atlanta Working Paper No. 2003-8

40 Pages Posted: 30 May 2003

See all articles by Robin Brooks

Robin Brooks

International Monetary Fund (IMF) - Financial Studies Division

Marco Del Negro

Federal Reserve Bank of New York

Multiple version iconThere are 4 versions of this paper

Date Written: March 2003

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.

Keywords: diversification, risk, international financial markets, industrial structure

JEL Classification: G11, G15

Suggested Citation

Brooks, Robin and Del Negro, Marco, Firm-Level Evidence on International Stock Market Comovement (March 2003). FRB of Atlanta Working Paper No. 2003-8, Available at SSRN: https://ssrn.com/abstract=404740 or http://dx.doi.org/10.2139/ssrn.404740

Robin Brooks (Contact Author)

International Monetary Fund (IMF) - Financial Studies Division ( email )

700 19th Street N.W.
Washington, DC 20431
United States

Marco Del Negro

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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