International stock return comovements

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  • 1 January 2008
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      • Published in RePEc
Abstract
We examine international stock return co-movements using country-industry and country-style portfolios as the base portfolios. We first establish that parsimonious risk-based factor models capture the covariance structure of the data better than the popular Heston- ouwenhorst (1994) model. We then establish the following stylized facts regarding stock return co-movements. First, we do not find evidence for an upward trend in return correlations, except for the European stock markets. Second, the increasing importance of industry factors relative to country factors was a short-lived, temporary phenomenon. JEL Classification: C52, G11, G12

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