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Firm-Level Evidenceon International Stock Market Comovement

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  • Mr. Robin Brooks
  • Mr. Marco Del Negro

Abstract

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.

Suggested Citation

  • Mr. Robin Brooks & Mr. Marco Del Negro, 2003. "Firm-Level Evidenceon International Stock Market Comovement," IMF Working Papers 2003/055, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2003/055
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    More about this item

    Keywords

    WP; sales beta; balance sheet; Diversification; risk; international financial markets; industrial structure; firm level; sales firm; sales variable; cross-sectional regression; goods firm; Stock markets; Stocks; Capital account; Personal income; Factor models; Global;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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