What Drives Asset Returns Comovements? Some Empirical Evidence from US Dollar and Global Stock Returns (2000–2023)

Marco Tronzano ()
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Marco Tronzano: Independent Researcher, Strada del Cresto 9, 10132 Turin, Italy

JRFM, 2024, vol. 17, issue 4, 1-26

Abstract: This paper focuses on returns comovements in global stock portfolios including the US Dollar as a defensive asset. The main contribution is the selection of a large set of macroeconomic and financial variables as potential drivers of these comovements and the emphasis on the predictive accuracy of proposed econometric models. One-year US Expected Inflation stands out as the most important predictor, while models including a larger number of variables yield significant predictive gains. Larger forecast errors, due to parameters instabilities, are documented during major financial crises and the COVID-19 pandemic period. Some research directions to improve the forecasting power of econometric models are discussed in the concluding section.

Keywords: financial assets comovements; global stock indexes; US dollar index (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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