Kiel Working Papers, Kiel Institute for World Economics
No 1244:
Firm-Level Evidence on International Stock Market Comovement
Robin Brooks, and Marc Del Negro
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 20 countries, we estimate a
factor model that decomposes stock returns into global, country-specific
and industry-specific shocks. We find a large and highly significant link:
on average, 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 countryspecific shocks by 1.5 percent. This link has grown
stronger since the mid-1980s.
Keywords: Diversification; risk; international financial markets; industrial structure; (follow links to similar papers)
JEL-Codes: G11,; G15; (follow links to similar papers)
30 pages, May 2005
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