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Global Stock Return Comovements: Trends and Determinants

Kei-Ichiro Inaba
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Kei-Ichiro Inaba: Bank of Japan

No 18-E-7, Bank of Japan Working Paper Series from Bank of Japan

Abstract: This article analyses global stock return comovements for 37 advanced and emerging countries over the period 1996-2015. The article reports that the comovements were greater in advanced countries than in emerging ones, but increased more rapidly in emerging countries than in advanced ones. Such comovements had upward and downward trends in 23 and 7 of the sample countries, respectively. The driving forces behind these comovements were country fixed effects and country-specific time-varying factors. These factors include the increasing openness of international trade and finance, business climate, and institutional opaqueness, which latter two worked in line with an information-driven comovement theory. The time-varying factors also include indicators representing monetary policy and capital controls, supporting a policy implication of a global financial cycle hypothesis: a monetary policy dilemma.

Keywords: Financial globalisation; International portofolio diversification; Stock market comovements; Information-driven comovements; Global financial cycle (search for similar items in EconPapers)
JEL-codes: F3 G1 O1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk
Date: 2018-04-11
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