International Financial Connection and Stock Return Comovement
IMF Working Papers, August 22, 2019
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- International Financial Connection and Stock Return Comovement
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Bibliographic details
- Authors: Sakai Ando
- Published: August 22, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513509822.001
Main finding
- Larger U.S. portfolio investment asset position on the destination economy predicts a stronger stock return comovement between the United States and that destination when the United States is chosen as the benchmark.
- For large economies such as the United States and Germany, the portfolio investment position is the best predictor among other connection variables.
Empirical approach and model
- Uses bilateral international financial connection data to predict bilateral stock return comovement.
- Discusses a simple general equilibrium portfolio model.
- The empirical pattern is consistent with index investors trading in response to risk-on/risk-off shocks.
Subject areas and keywords
- Subjects: Balance of payments, Bond yields, Financial institutions, Financial markets, Foreign direct investment, Portfolio investment, Stock markets, Stocks.
- Keywords: asset data, asset economy, Bond yields, comovement data, comovement variable, equity return, Foreign direct investment, Global, international investment position, Portfolio investment, portfolio investment data, portfolio investment position, risk tolerance, risk-off, risk-on, Stock markets, stock return behavior, stock return comovement, stock return correlation, Stocks, WP.
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- Working Paper