## Firm-Level Evidenceon International Stock Market Comovement

_IMF Working Papers, March 1, 2003_

## Source details

**Canonical URL:** [Firm-Level Evidenceon International Stock Market Comovement](https://www.imf.org/en/publications/wp/issues/2016/12/30/firm-level-evidenceon-international-stock-market-comovement-16387)

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- [Markdown version](/en/publications/wp/issues/2016/12/30/firm-level-evidenceon-international-stock-market-comovement-16387/index.md)
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## Bibliographic details
- Authors: Robin Brooks, Marco Del Negro
- Published: March 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451847642.001

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### Summary
- The paper explores 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, the authors estimate a factor model that decomposes stock returns into global, country-specific and industry-specific shocks.
- Key quantitative result: 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.
- The link between firm internationalization and exposure to global shocks has grown stronger since the mid-1980s.

### Methods and Data
- Data: stock returns and balance sheet data for companies in 20 countries.
- Empirical approach: estimation of a factor model that decomposes stock returns into:
  - global shocks,
  - country-specific shocks,
  - industry-specific shocks.
- Cross-sectional regression analysis is used to relate firm-level international sales to exposures to the decomposed shocks.

### Main Findings
- A 10 percent increase in a firm's international sales is associated with:
  - a 2 percent increase in the exposure of its stock return to global shocks,
  - a 1.5 percent decrease in the exposure to country-specific shocks.
- The relationship between greater international sales and higher global shock exposure is large, highly significant, and has strengthened since the mid-1980s.

### Subject Areas and Keywords
- Subject areas: 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.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/firm-level-evidenceon-international-stock-market-comovement-16387_