Working Paper Revision
International Stock Comovements with Endogenous Clusters
Abstract: We examine international stock return comovements of country-industry portfolios. Our model allows comovements to be driven by a global and a cluster component, with the cluster membership endogenously determined. Results indicate that country-industry portfolios tend to cluster mainly within geographical areas that can include one or more countries. The cluster compositions substantially changed over time, with the emergence of clusters among European countries from the early 2000s. The cluster component was the main driver of country-industry portfolio returns for most of the sample, except from the mid-2000s to the mid-2010s when the global component had a more prominent role.
Keywords: diversification; risk; international financial markets; clustered factor model;
https://doi.org/10.20955/wp.2018.038
Status: Published in Journal of Economic Dynamics & Control
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Bibliographic Information
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2020-03-27
Number: 2018-038
Related Works
- Publisher Article (2020-07) : International Stock Comovements with Endogenous Clusters
- Working Paper Revision (2020-03-27) : You are here.
- Working Paper Original (2018-10-24) : International Stock Comovements with Endogenous Clusters