skip to content

Faculty of Economics

Journal Cover

Anagnostopoulos, A., Atesagaoglu, O. E., Faraglia, E. and Giannitsarou, C.

Cross-Country Stock Market Comovement: A Macro Perspective

Journal of Monetary Economics

Vol. 130 pp. 34-48 (2022)

Abstract: Since the 1990s, there has been a simultaneous rise in cross-country stock market correlations and FDI positions. We establish an empirical relationship between these two, for pairs of developed economies that survives controlling for relevant factors. At firm level, we find that stock returns of multinationals that invest in technology capital are more correlated with world stock markets. Using a calibrated two-country asset pricing model with multinationals, we find that the increase in FDI accounts for one third of the rise in the observed stock market correlations. When allowing for increases in trade and portfolio diversification, we find that these two factors do not generate an increase in stock market correlations.

Keywords: Stock market comovement, foreign direct investment, multinational firms, asset pricing, international trade, portfolio diversification

JEL Codes: G15, F21, F23, G12, F44

Author links: Chryssi Giannitsarou  Elisa Faraglia  

Publisher's Link:

Papers and Publications

Recent Publications

Carvalho, V. M., Nirei, M., Saito, Y. U. and Tahbaz-Salehi, A. Supply Chain Disruptions: Evidence from the Great East Japan Earthquake Quarterly Journal of Economics [2021]

Ambrus, A. and Elliott, M. Investments in Social Ties, Risk Sharing, and Inequality Review of Economic Studies [2021]

Boneva, L., Elliott, D., Kaminska, I., Linton, O., McLaren, N. and Morley, B. The Impact of Corporate QE on Liquidity: Evidence from the UK The Economic Journal [2022]

Ding, Y. A Simple Joint Model for Returns, Volatility and Volatility of Volatility Journal of Econometrics [2023]