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The Rise in Comovement Across National Stock Markets: Market Integration or Global Bubble?
Author:
Mr. Robin Brooks
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and
Mr. Marco Del Negro null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2002: Issue 147
Language:
English
Publication Date:
01 Sep 2002
DOI:
https://doi.org/10.5089/9781451856743.001
ISBN:
9781451856743
ISSN:
1018-5941
Pages:
23
Keywords:
WP; industry effect; TMBT firm; TMBT sector; U.S. dollar; Diversification; risk; international financial markets; industrial structure; industry mean absolute deviations; industry factor; TMBT industry; Stock markets; Emerging and frontier financial markets; Market capitalization; Stocks; Financial integration; Europe; Western Europe; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund