Abstract
We investigate the return comovement in international equity markets with a focus on the distinction between economic fundamentals and contagion. We examine the potential macro news effect based on a comprehensive data set of macroeconomic news announcements made in the U.S., U.K., and Japan. Our results show that the bulk of the observed comovement in the intraday and overnight returns of the international equity markets cannot be attributed to public information about economic fundamentals. In contrast, foreign market returns exert a dominant influence on the subsequent domestic market returns. Overall, our findings suggest that future inquiry on market comovement may focus on the distinction between contagion and trading on private information, rather than public information.
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