Title: A global look at stock market comovements
Authors: Kei Ichiro Inaba - Bank of Japan (Japan) [presenting]
Abstract: International stock market comovements are analysed for 37 advanced and emerging countries in 1996-2015. The degrees of the comovements were substantial: the sample-country and sample-period average is 56 per cent. These degrees had upward and downward trends in 23 and 7 of the sample countries, respectively. They were greater in advanced countries than in emerging ones. The comovements changed over time in a similar fashion for different country-groups - a representation of a global financial cycle -, but increased more rapidly in emerging countries than in advanced ones. The driving forces behind differences in the commovements across countries and over time were country-specific heterogeneities and time-varying factors. These factors relate to the scale of national economy, the openness of international trade, and policies of monetary authorities: the level of short-term interest rates, the openness of the capital account, and the variability of foreign exchange rates. The comovement tended to be smaller in a country with a less open capital account and a less flexible foreign exchange market. A countrys short-term interest-rate differentials with respect to the United States were a negative determinant of the countrys stock market comovement when its capital account is controlled- corroboration for a monetary policy dilemma.