Abstract

ABSTRACT This paper investigates the dynamics of international stock return correlations between the U.S., the U.K., Germany and France. Estimated correlations are modeled in an ARDL framework to evaluate how the market-wide uncertainty in the U.S. affects international stock market comovements. Results show that a shock to the VIX leads to increases in cross-county correlations in the following week and that the correlations tend to decline in the second week that follows the shock. The revealed time pattern of the effect of the VIX may be explained in a behavioral framework through investors’ attention reallocation mechanism.

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.