Firm-Level Evidence on International Stock Market Comovement
FRB of Atlanta Working Paper No. 2003-8
40 Pages Posted: 30 May 2003
There are 4 versions of this paper
Firm-Level Evidence on International Stock Market Comovement
Firm-Level Evidence on International Stock Market Comovement
Firm-Level Evidence on International Stock Market Comovement
Firm-Level Evidence on International Stock Market Comovement
Date Written: March 2003
Abstract
We explore the link between international stock market comovement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in twenty countries, we estimate a factor model that decomposes stock returns into global, country- and industry-specific shocks. We find a large and highly significant link: a firm raising its international sales by 10 percent raises the exposure of its stock return to global shocks by 2 percent and reduces its exposure to country-specific shocks by 1.5 percent. This link has grown stronger over time since the mid-1980s.
Keywords: diversification, risk, international financial markets, industrial structure
JEL Classification: G11, G15
Suggested Citation: Suggested Citation
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