NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

International Stock Return Comovements

Geert Bekaert, Robert J. Hodrick, Xiaoyan Zhang

NBER Working Paper No. 11906
Issued in December 2005
NBER Program(s):   AP   IFM

We examine international stock return comovements using country-industry and country-style portfolios. We first establish that parsimonious risk-based factor models capture the covariance structure of the data better than the popular Heston-Rouwenhorst (1994) model. We then establish the following stylized facts regarding stock return comovements. First, we do not find evidence for an upward trend in return correlations, excpet for the European stock markets. Second, the increasing imporatnce of industry factors relative to country factors was a short-lived, temporary phenomenon. Third, we find no evidence for a trend in idiosyncratic risk in any of the countries we examine.

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Document Object Identifier (DOI): 10.3386/w11906

Published: Geert Bekaert & Robert J. Hodrick & Xiaoyan Zhang, 2009. "International Stock Return Comovements," Journal of Finance, American Finance Association, vol. 64(6), pages 2591-2626, December. citation courtesy of

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