Market Integration and Small Stock Returns: A Co-Movement Analysis
Ludwig-Maximilians-Universität Munich - Faculty of Business Administration (Munich School of Management)
University of Konstanz - Department of Economics
October 30, 2012
Whether benefits from international diversification still persist is heavily debated by academics and practitioners. Recent research yields contradicting results concerning the question whether correlations between stocks have increased over time. The recent study by Bekaert, Hodrick and Zhang (Journal of Finance 2009) finds that there is no evidence for an upward trend in return correlations, except for European stock markets. We extend their analysis by showing that this result is driven by Large Cap stocks and does not hold for European Small Cap stocks. As a new insight, we find that even without European market integration Large Cap stock return correlations would have increased over time.
Number of Pages in PDF File: 49
Keywords: co-movements, market integration, international diversification, correlation dynamics, small caps
JEL Classification: C52, G11, G12working papers series
Date posted: March 15, 2012 ; Last revised: October 30, 2012
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo8 in 0.891 seconds