Comovement in international equity markets: A sectoral view

Robert-Paul Berben and W. Jos Jansen ()
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Robert-Paul Berben: De Nederlandsche Bank

Finance from EconWPA

Abstract: 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.

Keywords: stock market linkages; financial integration; smooth transition (search for similar items in EconPapers)
JEL-codes: C22 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-ets, nep-fmk and nep-rmg
Date: 2003-10-01
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
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http://129.3.20.41/eps/fin/papers/0310/0310001.pdf (application/pdf)

Related works:
Working Paper: Comovement in International Equity Markets: a Sectoral View (2001)
Journal Article: Comovement in international equity markets: A sectoral view (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0310001

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