Firm-Level Evidenceon International Stock Market Comovement
March 1, 2003
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Summary
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 country-specific shocks by 1.5 percent. This link has grown stronger since the mid-1980s.
Subject: Balance of payments, Capital account, Econometric analysis, Factor models, Financial institutions, Financial markets, National accounts, Personal income, Stock markets, Stocks
Keywords: balance sheet, Capital account, cross-sectional regression, Diversification, Factor models, firm level, Global, goods firm, industrial structure, international financial markets, Personal income, risk, sales beta, sales firm, sales variable, Stock markets, Stocks, WP
Pages:
31
Volume:
2003
DOI:
Issue:
055
Series:
Working Paper No. 2003/055
Stock No:
WPIEA0552003
ISBN:
9781451847642
ISSN:
1018-5941
