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This paper studies whether bilateral international financial connection data help predict bilateral stock return comovement. It is shown that, when the United States is chosen as the benchmark, a larger U.S. portfolio investment asset position on the destination economy predicts a stronger stock return comovement between them. For large economies such as the United States and Germany, the portfolio investment position is also the best predictor among other connection variables. The paper discusses with a simple general equilibrium portfolio model that the empirical pattern is consistent with the behavior of index investors who trade in response to risk-on/risk-off shocks.
Book Synopsis International Financial Connection and Stock Return Comovement by : Mr.Sakai Ando
Download or read book International Financial Connection and Stock Return Comovement written by Mr.Sakai Ando and published by International Monetary Fund. This book was released on 2019-08-22 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies whether bilateral international financial connection data help predict bilateral stock return comovement. It is shown that, when the United States is chosen as the benchmark, a larger U.S. portfolio investment asset position on the destination economy predicts a stronger stock return comovement between them. For large economies such as the United States and Germany, the portfolio investment position is also the best predictor among other connection variables. The paper discusses with a simple general equilibrium portfolio model that the empirical pattern is consistent with the behavior of index investors who trade in response to risk-on/risk-off shocks.
This paper studies whether bilateral international financial connection data help predict bilateral stock return comovement. It is shown that, when the United States is chosen as the benchmark, a larger U.S. portfolio investment asset position on the destination economy predicts a stronger stock return comovement between them. For large economies such as the United States and Germany, the portfolio investment position is also the best predictor among other connection variables. The paper discusses with a simple general equilibrium portfolio model that the empirical pattern is consistent with the behavior of index investors who trade in response to risk-on/risk-off shocks.
Book Synopsis International Financial Connection and Stock Return Comovement by : Sakai Ando
Download or read book International Financial Connection and Stock Return Comovement written by Sakai Ando and published by . This book was released on 2019 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies whether bilateral international financial connection data help predict bilateral stock return comovement. It is shown that, when the United States is chosen as the benchmark, a larger U.S. portfolio investment asset position on the destination economy predicts a stronger stock return comovement between them. For large economies such as the United States and Germany, the portfolio investment position is also the best predictor among other connection variables. The paper discusses with a simple general equilibrium portfolio model that the empirical pattern is consistent with the behavior of index investors who trade in response to risk-on/risk-off shocks.
We explore the link between international stock market comovement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in 20 countries, we estimate a factor model that decomposes stock returns into global, country-specific and industry-specific shocks. We find a large and highly significant link: on average, a firm raising its international sales by 10 percent raises the exposure of its stock return to global shocks by 2 percent and reduces its exposure to country-specific shocks by 1.5 percent. This link has grown stronger since the mid-1980s.
Book Synopsis Firm-Level Evidenceon International Stock Market Comovement by : Mr.Marco Del Negro
Download or read book Firm-Level Evidenceon International Stock Market Comovement written by Mr.Marco Del Negro and published by International Monetary Fund. This book was released on 2003-03-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the link between international stock market comovement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in 20 countries, we estimate a factor model that decomposes stock returns into global, country-specific and industry-specific shocks. We find a large and highly significant link: on average, a firm raising its international sales by 10 percent raises the exposure of its stock return to global shocks by 2 percent and reduces its exposure to country-specific shocks by 1.5 percent. This link has grown stronger since the mid-1980s.
We study the link between international stock return comovements and institutional investment. We test the hypothesis that the rise of institutional investors as shareholders of corporations worldwide has increased cross-country correlations and decreased cross-industry correlations. Using stock-level institutional holdings across 45 countries during the period 2001-2010, we find that industry and global factors are relatively more important than country factors in explaining stock return variation among stocks with higher institutional ownership. Industry diversification strategies offer more benefits than country diversification benefits for stocks with high institutional ownership. Our findings show that cross-border portfolio investment is a powerful force of international capital markets integration and convergence of asset prices across countries.
Book Synopsis Does Institutional Ownership Matter for International Stock Return Comovement? by : José Afonso Faias
Download or read book Does Institutional Ownership Matter for International Stock Return Comovement? written by José Afonso Faias and published by . This book was released on 2017 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the link between international stock return comovements and institutional investment. We test the hypothesis that the rise of institutional investors as shareholders of corporations worldwide has increased cross-country correlations and decreased cross-industry correlations. Using stock-level institutional holdings across 45 countries during the period 2001-2010, we find that industry and global factors are relatively more important than country factors in explaining stock return variation among stocks with higher institutional ownership. Industry diversification strategies offer more benefits than country diversification benefits for stocks with high institutional ownership. Our findings show that cross-border portfolio investment is a powerful force of international capital markets integration and convergence of asset prices across countries.
We explore the link between international stock market comovement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in twenty countries, we estimate a factor model that decomposes stock returns into global, country- and industry-specific shocks. We find a large and highly significant link: a firm raising its international sales by 10 percent raises the exposure of its stock return to global shocks by 2 percent and reduces its exposure to country-specific shocks by 1.5 percent. This link has grown stronger over time since the mid-1980s.
Book Synopsis Firm-Level Evidence on International Stock Market Comovement by : Robin Brooks
Download or read book Firm-Level Evidence on International Stock Market Comovement written by Robin Brooks and published by . This book was released on 2014 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the link between international stock market comovement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in twenty countries, we estimate a factor model that decomposes stock returns into global, country- and industry-specific shocks. We find a large and highly significant link: a firm raising its international sales by 10 percent raises the exposure of its stock return to global shocks by 2 percent and reduces its exposure to country-specific shocks by 1.5 percent. This link has grown stronger over time since the mid-1980s.
Stock return comovement analysis is important to financial analysts, decision makers, and academic researchers, in many financial implications, such as, portfolio management, style investing, and market risk detecting. This paper examines firms' social media, in particular, microblogging metrics' role on analyzing stock return comovement. Social media allows firms to proactively connect with public users, customers, suppliers, and other business partners. It also provides us a large-scale and free data set to automatically and quickly uncover firms' social media metrics' influence on financial outcomes. Most prior studies of social media metrics focused on overall firm metrics and their predictability on stock returns. However, the role of firms proactive activities has been omitted. This paper filled this gap by using cross-sectional data from the US and China to investigate on how firm-specific social media metrics make an impact to the stock return comovement. The results show starting with the four-digit Global Industry Classification Standard (GICS) system, the stock groups that are divided by firms' effect microblogging metrics, have a higher comovement than six-digit GICS groups.
Book Synopsis Microblogging Metrics and Stock Return Comovement by : Ling Liu
Download or read book Microblogging Metrics and Stock Return Comovement written by Ling Liu and published by . This book was released on 2014 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stock return comovement analysis is important to financial analysts, decision makers, and academic researchers, in many financial implications, such as, portfolio management, style investing, and market risk detecting. This paper examines firms' social media, in particular, microblogging metrics' role on analyzing stock return comovement. Social media allows firms to proactively connect with public users, customers, suppliers, and other business partners. It also provides us a large-scale and free data set to automatically and quickly uncover firms' social media metrics' influence on financial outcomes. Most prior studies of social media metrics focused on overall firm metrics and their predictability on stock returns. However, the role of firms proactive activities has been omitted. This paper filled this gap by using cross-sectional data from the US and China to investigate on how firm-specific social media metrics make an impact to the stock return comovement. The results show starting with the four-digit Global Industry Classification Standard (GICS) system, the stock groups that are divided by firms' effect microblogging metrics, have a higher comovement than six-digit GICS groups.
Book Synopsis Portfolio Preferences of Foreign Institutional Investors by : Reena Aggarwal
Download or read book Portfolio Preferences of Foreign Institutional Investors written by Reena Aggarwal and published by World Bank Publications. This book was released on 2003 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt:
We investigate how corporate stock returns respond to geopolitical risk in the case of South Korea, which has experienced large and unpredictable geopolitical swings that originate from North Korea. To do so, a monthly index of geopolitical risk from North Korea (the GPRNK index) is constructed using automated keyword searches in South Korean media. The GPRNK index, designed to capture both upside and downside risk, corroborates that geopolitical risk sharply increases with the occurrence of nuclear tests, missile launches, or military confrontations, and decreases significantly around the times of summit meetings or multilateral talks. Using firm-level data, we find that heightened geopolitical risk reduces stock returns, and that the reductions in stock returns are greater especially for large firms, firms with a higher share of domestic investors, and for firms with a higher ratio of fixed assets to total assets. These results suggest that international portfolio diversification and investment irreversibility are important channels through which geopolitical risk affects stock returns.
Book Synopsis Geopolitical Risk on Stock Returns: Evidence from Inter-Korea Geopolitics by : Seungho Jung
Download or read book Geopolitical Risk on Stock Returns: Evidence from Inter-Korea Geopolitics written by Seungho Jung and published by International Monetary Fund. This book was released on 2021-10-22 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate how corporate stock returns respond to geopolitical risk in the case of South Korea, which has experienced large and unpredictable geopolitical swings that originate from North Korea. To do so, a monthly index of geopolitical risk from North Korea (the GPRNK index) is constructed using automated keyword searches in South Korean media. The GPRNK index, designed to capture both upside and downside risk, corroborates that geopolitical risk sharply increases with the occurrence of nuclear tests, missile launches, or military confrontations, and decreases significantly around the times of summit meetings or multilateral talks. Using firm-level data, we find that heightened geopolitical risk reduces stock returns, and that the reductions in stock returns are greater especially for large firms, firms with a higher share of domestic investors, and for firms with a higher ratio of fixed assets to total assets. These results suggest that international portfolio diversification and investment irreversibility are important channels through which geopolitical risk affects stock returns.
Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.
Book Synopsis International Capital Flows by : Martin Feldstein
Download or read book International Capital Flows written by Martin Feldstein and published by University of Chicago Press. This book was released on 2007-12-01 with total page 500 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.
In recent decades, the foreign assets and liabilities of advanced economies have grown rapidly relative to GDP, with the increase in gross cross-holdings far exceeding changes in the size of net positions. Moreover, the portfolio equity and FDI categories have grown in importance relative to international debt stocks. This paper describes the broad trends in international financial integration for a sample of industrial countries and seeks to explain the cross-country and time-series variation in the size of international balance sheets. It also examines the behavior of the rates of return on foreign assets and liabilities, relating them to "market" returns.
Book Synopsis International Financial Integration by : Mr.Gian Milesi-Ferretti
Download or read book International Financial Integration written by Mr.Gian Milesi-Ferretti and published by International Monetary Fund. This book was released on 2003-04-01 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent decades, the foreign assets and liabilities of advanced economies have grown rapidly relative to GDP, with the increase in gross cross-holdings far exceeding changes in the size of net positions. Moreover, the portfolio equity and FDI categories have grown in importance relative to international debt stocks. This paper describes the broad trends in international financial integration for a sample of industrial countries and seeks to explain the cross-country and time-series variation in the size of international balance sheets. It also examines the behavior of the rates of return on foreign assets and liabilities, relating them to "market" returns.
