Global Production Linkages and Stock Market Comovement

Raphael Auer, Bruce Iwadati, Andreas Schrimpf and Alexander F. Wagner

No 18330, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Although real integration conceptually plays an important role for the comovement of international equity markets, documenting this link empirically has proven challenging. We construct a new dataset of theory-guided, relevant measures of bilateral trade in final and intermediate goods and services. With these measures, we provide evidence of a strong link between changes in international trade – in particular global value chains – and equity market comovement. These results suggest that supply chain disruptions and reshoring, for instance due to political tensions, war, and the COVID-19 crisis, might affect the interconnections between stock markets via rippling through the global production network.

Keywords: Financial integration; Global value chains; International asset pricing; International trade; Spillovers; real integration (search for similar items in EconPapers)
JEL-codes: F10 F36 F65 G10 G15 (search for similar items in EconPapers)
Date: 2023-07
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Related works:
Working Paper: Global Production Linkages and Stock Market Comovement (2023)
Working Paper: Global production linkages and stock market co-movement (2022)
Working Paper: Global Production Linkages and Stock Market Comovement (2022)
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