Correlation Dynamics of Global Industry Portfolios

59 Pages Posted: 16 Mar 2004

See all articles by Miguel A. Ferreira

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Paulo M. Gama

University of Coimbra

Date Written: March 2004

Abstract

This paper uses within-month daily returns to measure realized correlation between global industry portfolios and the aggregate world market. Over the period from 1979 to 2003, there has been a noticeable increase in the correlation of high size industries relative to low size industries. Industry correlations are greater for downside moves than for upside moves. Moreover, industry correlations are greater for high volatility states, especially for upside moves, than for low volatility states. Industries with low market capitalization, volume, turnover, and liquidity have lower correlations and more asymmetric movements. Low price earnings ratio industries also have lower correlation, but less asymmetric movements.

Keywords: Correlation, global industry portfolios, asymmetries, trends

JEL Classification: G11, G15, F30

Suggested Citation

Ferreira, Miguel Almeida and Gama, Paulo Miguel, Correlation Dynamics of Global Industry Portfolios (March 2004). Available at SSRN: https://ssrn.com/abstract=517742 or http://dx.doi.org/10.2139/ssrn.517742

Miguel Almeida Ferreira

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Paulo Miguel Gama (Contact Author)

University of Coimbra ( email )

Av. Dias da Silva, 165
Coimbra, 3004-512
Portugal
+351 239 790523 (Phone)
+351 239 403511 (Fax)

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