Co-Movements in International Equity Markets

J. OF FINANCIAL RESEARCH

Posted: 9 Apr 1997

See all articles by Salim M. Darbar

Salim M. Darbar

International Monetary Fund (IMF)

Partha Deb

City University of New York, CUNY Hunter College - Department of Economics

Abstract

We examine the co-movements of equity returns in four major international markets by characterizing the time-varying cross-country covariances and correlations. Using a generalized positive definite multivariate GARCH model, we find that the Japanese and U.S. stock markets have significant transitory covariance, but zero permanent covariance. The other pairs of markets examined display significant permanent and transitory covariance. We also find that, while conditional correlations between returns are generally small, they change considerably over time. An event analysis suggests that basing diversification strategies on these conditional correlations is potentially beneficial.

JEL Classification: G12, G15, C32

Suggested Citation

Darbar, Salim M. and Deb, Partha, Co-Movements in International Equity Markets. J. OF FINANCIAL RESEARCH. Available at SSRN: https://ssrn.com/abstract=8258

Salim M. Darbar

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Partha Deb (Contact Author)

City University of New York, CUNY Hunter College - Department of Economics ( email )

695 Park Avenue
New York, NY 10021
United States

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