Investment?

Question

Can someone offer some information on whether you would expect any change in the correlation between U.S. stocks and the stocks for different countries. For example, can someone discuss whether you would expect the correlation between U.S. and Japanese stock returns to change over time.

Answer 1

In general, as companies become increasingly global, we would expect to see correlations increase across different markets.

The effect is probably going to be somewhat less for the Japan versus the United States, because there is already a pretty high degree of correlation there, but if you look at emerging markets, as they mature and begin to export products, the returns of those comapnies in those countries begins to depend more ont he macro factors in the countries where they are selling their products than on the factors in their home countries.

Also, wth many large multinational corporations, their shares are listed on exchanges and bourses throughout the world in addition to US ADR shares. If a pricing discrepancy opens up between the home exchange and the US ADR, then an arbitrage opportunity exists. Arbitrageurs will close that gap up pretty quickly, which keeps the estbalished global markets moving pretty closely together.

Answer 2

no correlation, all speculation