International Stock Return Comovements

Robert Hodrick (), Geert Bekaert and Xiaoyan Zhang ()

No 5955, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine international stock return comovements using country-industry and country-style portfolios. We first establish that parsimonious risk-based factor models capture the covariance structure of the data better than the popular Heston-Rouwenhorst (1994) model. We then establish the following stylized facts regarding stock return comovements. First, we do not find evidence for an upward trend in return correlations, excpet for the European stock markets. Second, the increasing imporatnce of industry factors relative to country factors was a short-lived, temporary phenomenon. Third, we find no evidence for a trend in idiosyncratic risk in any of the countries we examine.

Keywords: International diversification; Correlation dynamics; Country debate; Factor models; Comovements (search for similar items in EconPapers)
JEL-codes: C52 G11 G12 (search for similar items in EconPapers)
Date: 2006-11
New Economics Papers: this item is included in nep-rmg
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: International Stock Return Comovements (2009)
Working Paper: International stock return comovements (2008)
Working Paper: International Stock Return Comovements (2005)
Working Paper: International Stock Return Comovements (2005)
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