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What Drives Asset Returns Comovements? Some Empirical Evidence from US Dollar and Global Stock Returns (2000–2023)

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  • Marco Tronzano

    (Independent Researcher, Strada del Cresto 9, 10132 Turin, Italy)

Abstract

This paper focuses on returns comovements in global stock portfolios including the US Dollar as a defensive asset. The main contribution is the selection of a large set of macroeconomic and financial variables as potential drivers of these comovements and the emphasis on the predictive accuracy of proposed econometric models. One-year US Expected Inflation stands out as the most important predictor, while models including a larger number of variables yield significant predictive gains. Larger forecast errors, due to parameters instabilities, are documented during major financial crises and the COVID-19 pandemic period. Some research directions to improve the forecasting power of econometric models are discussed in the concluding section.

Suggested Citation

  • Marco Tronzano, 2024. "What Drives Asset Returns Comovements? Some Empirical Evidence from US Dollar and Global Stock Returns (2000–2023)," JRFM, MDPI, vol. 17(4), pages 1-26, April.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:4:p:167-:d:1378380
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