THE CO-MOVEMENT OF INTERNATIONAL ASSET RETURNS

Previous studies have analyzed the comovement of international stock returns during periods of fixed exchange rates[11, 15]. Results of these studies have indicated an increasing correlation between U.S. stocks and foreign stock returns. This paper explores the weekly comovement of international equity and long–term bond returns for nine industrialized countries—United Kingdom, United States, West Germany, Netherlands, Belgium, France, Switzerland, Italy, and Japan—during the period of floating exchange rates, 1973–1977. Results of this study indicate (1) a low correlations between U.S. and foreign stock and long-term bond returns; (2) The necessity for adjusting for exchange rate movement before analyzing relative between countries; and (3) the importance of percentage changes in money supply, prices levels, and real gross national products are in determining the unadjusted asset returns and exchange rate movement. © 1979, Academy of International Business.