This paper tests if real and financial linkages between countries can explain why movements in the world's largest markets often have such large effects on other financial markets, and how these cross-market linkages have changed over time. It estimates a factor model in which a country's market...

I explore empirically the interactions between international trade and stock markets. A simple "Lucas-tree" two-country, two-good, free-trade model with complete asset markets predicts that stock markets forecast trade flows and that stock markets react immediately and fully to news about...