International Stock Comovements with Endogenous Clusters

Laura Coroneo, Laura E. Jackson and Michael Owyang
Authors registered in the RePEc Author Service: Laura Jackson and Laura Jackson Young

No 2018-038, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We examine international stock return comovements of country-industry portfolios. Our model allows comovements to be driven by a global and a cluster component, with the cluster membership endogenously determined. Results indicate that country-industry portfolios tend to cluster mainly within geographical areas that can include one or more countries. The cluster compositions substantially changed over time, with the emergence of clusters among European countries from the early 2000s. The cluster component was the main driver of country-industry portfolio returns for most of the sample, except from the mid-2000s to the mid-2010s when the global component had a more prominent role.

Keywords: diversification; risk; international financial markets; clustered factor model (search for similar items in EconPapers)
JEL-codes: C38 G15 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2018-10-24, Revised 2020-03-27
New Economics Papers: this item is included in nep-fmk
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Economic Dynamics & Control

Downloads: (external link)
https://s3.amazonaws.com/real.stlouisfed.org/wp/2018/2018-038.pdf Full text (application/pdf)

Related works:
Journal Article: International Stock Comovements with Endogenous Clusters (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2018-038

Ordering information: This working paper can be ordered from

DOI: 10.20955/wp.2018.038

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().