Firm-Level Evidenceon International Stock Market Comovement
Author | : Mr.Marco Del Negro |
Publisher | : International Monetary Fund |
Total Pages | : 32 |
Release | : 2003-03-01 |
Genre | : Business & Economics |
ISBN | : 1451847645 |
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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.