Review of Finance Vol. 13 No. 3 2009

Economic News and International Stock Market Co-movement

Rui Albuquerque¹; Clara Vega²

¹ Boston University School of Management and CEPR 1 · ² Board of Governors of the Federal Reserve System and William E. Simon School of Management 2

Abstract

We analyze the effects that real-time domestic and foreign news about fundamentals have on the co-movement between stock returns of a small, open economy, Portugal, and a large economy, the United States. Consistent with our theoretical model, we find that US macroeconomic news and Portuguese earnings news do not affect stock market co-movement, whereas Portuguese macroeconomic news lowers stock market co-movement. We find that US news affects Portuguese stock market returns, though less so when US stock market returns are included in the regression. We provide evidence, contrary to common wisdom, that this last result does not derive from contagion.

DOI

10.1093/rof/rfn020

Volume

13

Issue

3

Pages

401-465

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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