Using the 2007-09 financial crisis as a laboratory, we analyze the transmission of crises to country-industry equity portfolios in 55 countries. We use a factor model to predict crisis returns, defining unexplained increases in factor loadings and residual correlations as indicative of...

In a sample of 110 countries over the period 1960-2009, we document a positive relation between the volatility and skewness of growth in the cross-section. The relation holds regardless of initial level of economic development and of subsequent long-run growth rate. We argue that this novel...

We identify flight-to-safety (FTS) days for 23 countries using only stock and bond returns and a model averaging approach. FTS days comprise less than 2% of the sample, and are associated with a 2.7% average bond-equity return differential and significant flows out of equity funds and into...

We propose a simple measure of de facto financial market integration based on a factor model of monthly equity returns, which can be computed back to the first era of financial globalization for 17 countries. Global financial market integration follows a “swoosh” shape – i.e. high...

We study the economic sources of stock-bond return comovements and its time variation using a dynamic factor model. We identify the economic factors employing a semi-structural regime-switching model for state variables such as interest rates, inflation, the output gap, and cash flow growth. We...

Measuring the integration of world capital markets is notoriously difficult. For example, regulatory changes which appear comprehensive may have little impact on the functioning of the capital market if they fail to lead to foreign portfolio inflows. In contrast to the usual practice of...

Judged by the principle of intertemporal Pareto optimality, insecure property rights and the greenhouse effect both imply overly rapid extraction of fossil carbon resources. A gradual expansion of demand-reducing public policies -- such as increasing ad-valorem taxes on carbon consumption or...

We examine the ability of existing and new factor models to explain the comovements of G10- currency changes, measured using the novel concept of “currency baskets”, representing the overall movement of a particular currency. Using a clustering technique, we find a clear two-block structure...