We develop a new dynamic factor model that allows us to jointly characterize global macroeconomic and financial cycles and the spillovers between them. The model decomposes macroeconomic cycles into the part driven by global and country-specific macro factors and the part driven by spillovers...

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...