Return Comovementworking paper (2017)
We examine intra-market return comovement within each of 33 economies’ stock exchanges from 1995 through 2013 using a model-free comovement gauge. We find that the stability of international macroeconomic trilemma policies, the number of crises, and the extent of turnover overshadow the empirical relevance of many variables previously thought to be important for intra-market comovement, including country risk, corruption, and investor protections. We also use a much longer historical sample of U.S. firms to examine compositional explanations of the well-known U.S. comovement decline and to decompose the comovement into trend and cycle. Our findings challenge the compositional explanations of the decline; additionally, they suggest that the most recent uptick reflects short-term conditions, rather than a trend reversal.
Publication DateJuly 17, 2017
Citation InformationDavid C. Parsley and Helen Popper. "Return Comovement" working paper (2017)
Available at: http://works.bepress.com/david_parsley/15/