Global Production Linkages and Stock Market Comovement

51 Pages Posted: 23 Feb 2022 Last revised: 7 Oct 2022

See all articles by Raphael Auer

Raphael Auer

Bank for International Settlements (BIS)

Bruce Iwadate

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department; Centre for Economic Policy Research (CEPR); University of Tuebingen

Alexander F. Wagner

University of Zurich - Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Date Written: October 4, 2022

Abstract

Although real integration conceptually plays an important role for the comovement of international equity markets, documenting this link empirically has proven challenging. We construct a new dataset of theory-guided, relevant measures of bilateral trade in final and intermediate goods and services. With these measures, we provide evidence of a strong link between changes in international trade – in particular global value chains – and equity market comovement. These results suggest that supply chain disruptions and reshoring, for instance due to political tensions, war, and the COVID-19 crisis, might affect the interconnections between stock markets via rippling through the global production network.

Keywords: financial integration, global value chains, international asset pricing, international trade, real integration, spillovers, stock market comovement, supply chains

JEL Classification: F10, F36, F65, G10, G12, G15

Suggested Citation

Auer, Raphael and Iwadate, Bruce and Schrimpf, Andreas and Wagner, Alexander F., Global Production Linkages and Stock Market Comovement (October 4, 2022). Swiss Finance Institute Research Paper No. 22-18, Available at SSRN: https://ssrn.com/abstract=4041037 or http://dx.doi.org/10.2139/ssrn.4041037

Raphael Auer

Bank for International Settlements (BIS) ( email )

Bruce Iwadate

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

HOME PAGE: http://https://www.biwadate.com/

Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Tuebingen ( email )

Wilhelmstr. 19
72074 Tuebingen, Baden Wuerttemberg 72074
Germany

Alexander F. Wagner (Contact Author)

University of Zurich - Department of Finance ( email )

Plattenstr 32
Zurich, 8032
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Swiss Finance Institute ( email )

Switzerland

HOME PAGE: http://www.alex-wagner.com

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
194
Abstract Views
807
Rank
294,062
PlumX Metrics