Firm-Level Evidenceon International Stock Market Comovement

Author/Editor:

Robin Brooks ; Marco Del Negro

Publication Date:

March 1, 2003

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Series:

Working Paper No. 03/55

Subject:

English

Publication Date:

March 1, 2003

ISBN/ISSN:

9781451847642/1018-5941

Stock No:

WPIEA0552003

Format:

Paper

Pages:

31

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