Publication

This paper examines the link between international stock market co-movement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in 20 countries, the authors estimate a factor model that decomposes stock returns into global, country-specific and industry-specific shocks. They find that a firm raising its international sales by 10 percent raises the exposure of its stock return to global shocks by two percent and reduces its exposure to country-specific shocks by 1.5 percent. They hold that this link has grown stronger between 1985 and 2002.