On international stock market co-movements and macroeconomic risks

Peng Chen and Shu Wu

Applied Economics Letters, 2013, vol. 20, issue 10, 978-982

Abstract: We use Bayesian dynamic factor models to disentangle the global and idiosyncratic country-specific factors of the stock market prices and other macroeconomic variables from a large group of countries. We find that the global factors account for significant portions of an individual country's stock market volatility and its macroeconomic fluctuations. The global macroeconomic shocks have strong effects on the stock price movement across countries in addition to domestic macroeconomic shocks. And a country's exposure to the global stock market risk to a large extent reflects that country's exposure to the global macroeconomic risks.

Date: 2013
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DOI: 10.1080/13504851.2013.767973

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