International Stock Return Comovements

Bekaert, Geert; Hodrick, Robert J.; Zhang, Xiaoyan

doi:10.3386/w11906

Cited by 126 publications

(122 citation statements)

References 24 publications

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“…This is particularly the case for equity investment in developed European markets, followed by emerging-market Asia and Latin America, but less so for bond investment. The observed pattern of cross-country correlations for equity returns is consistent with Bekaert et al (2009) that there are significant and increasing equity return correlations for the European equity markets, and that the regional effect is an important element in the international equity return comovements (see also Brooks and Del Negro, 2005).…”

Section: Covariance Of Net Inflows and Local Market Returnssupporting

confidence: 60%

International fund investment and local market returns

Jinjarak

Wongswan

Zheng

2011

Journal of Banking & Finance

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a b s t r a c tInternational fund investment in bonds and equities is characterized by a positive association between current net inflows and contemporaneous and past market returns: positive-feedback trading, while being possibly profitable for international fund investors, could be destabilizing for the underlying markets. Allowing for interactions between equity investment and bond investment, our panel vector autoregression shows that past equity returns contain useful information in forecasting equity and bond flows and that bond flows impact future equity returns positively.

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Section: Covariance Of Net Inflows and Local Market Returnssupporting

confidence: 60%

International fund investment and local market returns

Jinjarak

Wongswan

Zheng

2011

Journal of Banking & Finance

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“…Recently, Eun and Lee (2010) document convergence in the risk-return characteristics (measured with the Euclidean distance) of 17 developed stock markets. Bekaert, Hodrick, and Zhang (2009) come to a different finding, using a "parsimonious risk-based factor model". They cannot find evidence for an upward trend in return correlations, except for the European markets.…”

Section: Related Literaturementioning

confidence: 99%

International Diversification Benefits with Foreign Exchange Investment Styles*

2013

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp11028.pdf Abstract This paper provides a comprehensive analysis of portfolio choice with popular foreign exchange (FX) investment styles such as carry trades and strategies commonly known as FX momentum, and FX value. We investigate if diversification benefits can be achieved by style investing in FX markets relative to a benchmark allocation consisting of U.S. bonds, U.S. stocks, and international stocks. Overall, our results suggest that there are significant improvements in international portfolio diversification due to style-based investing in FX markets (both in the statistical, and most importantly, in the economic sense). These results prevail for the most important investment styles after accounting for transaction costs due to re-balancing of currency positions, and also hold in out-of-sample tests. Moreover, these gains do not only apply to a mean-variance investor but we also show that international portfolios augmented by FX investment styles are superior in terms of second and third order stochastic dominance. Thus, even an investor who dislikes negatively skewed return distributions would prefer a portfolio augmented by FX investment styles compared to the benchmark. Non-technical SummaryJEL-Classification: G11, G12, G15

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“…There was a wave of publications on co-movements in top-tier journals in the mid-1990s. More recent contributions include Forbes and Rigobon (2002), Greenwood (2008), Bekaert et al (2009), Green and Hwang (2009), and Bekaert et al (2010) with a focus on co-movement factors. Later in this section we introduce studies that are more directly related to our analysis.…”

Section: Introductionmentioning

confidence: 99%

Gold, oil, and stocks: Dynamic correlations

Baruník

Kočenda

Vácha

2016

International Review of Economics & Finance

120

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We employ a wavelet approach and conduct a time-frequency analysis of dynamic correlations between pairs of key traded assets (gold, oil, and stocks) covering the period from 1987 to 2012. The analysis is performed on both intra-day and daily data. We show that heterogeneity in correlations across a number of investment horizons between pairs of assets is a dominant feature during times of economic downturn and financial turbulence for all three pairs of the assets under research. Heterogeneity prevails in correlations between gold and stocks. After the 2008 crisis, correlations among all three assets increase and become homogenous: the timing differs for the three pairs but coincides with the structural breaks that are identified in specific correlation dynamics. A strong implication emerges: during the period under research, and from a different-investment-horizons perspective, all three assets could be used in a well-diversified portfolio only during relatively short periods. Terms of use: Documents inJEL-Code: C010, C130, C580, F370, G110, G150.

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International Stock Return Comovements

Cited by 126 publications

References 24 publications

International fund investment and local market returns

International fund investment and local market returns

International Diversification Benefits with Foreign Exchange Investment Styles*

Gold, oil, and stocks: Dynamic correlations

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