Abstract
This paper focuses on returns comovements in global stock portfolios including the US Dollar as a defensive asset. The main contribution is the selection of a large set of macroeconomic and financial variables as potential drivers of these comovements and the emphasis on the predictive accuracy of proposed econometric models. One-year US Expected Inflation stands out as the most important predictor, while models including a larger number of variables yield significant predictive gains. Larger forecast errors, due to parameters instabilities, are documented during major financial crises and the COVID-19 pandemic period. Some research directions to improve the forecasting power of econometric models are discussed in the concluding section.
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