The Rise in Comovement Across National Stock Markets: Market Integration or Global Bubble?

September 1, 2002

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Robin Brooks, and Marco Del Negro. The Rise in Comovement Across National Stock Markets: Market Integration or Global Bubble?, (USA: International Monetary Fund, 2002) accessed December 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The degree of comovement across national stock markets has increased dramatically since the mid-1990s. This has overturned a stylized fact in the international portfolio diversification literature that diversifying across countries is more effective for risk reduction than diversifying across industries. We investigate if this rise in comovement is a permanent phenomenon driven by greater economic and financial integration, or a temporary effect associated with the recent stock market bubble. At the global level, our results point to the bubble. At a regional level, we find evidence of a significant rise in market integration within Europe, possibly a reflection of institutional changes such as the EMU.

Subject: Emerging and frontier financial markets, Financial institutions, Financial integration, Financial markets, Market capitalization, Stock markets, Stocks

Keywords: Diversification, Emerging and frontier financial markets, Europe, Financial integration, Global, Industrial structure, Industry effect, Industry factor, Industry mean absolute deviations, International financial markets, Market capitalization, Risk, Stock markets, Stocks, TMBT firm, TMBT industry, TMBT sector, U.S. dollar, Western Europe, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/147
Stock No:

WPIEA1472002
ISBN:

9781451856743
ISSN:

1018-5941

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