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The co-movement of financial markets is a primary topic of empirical investigation. However, the precise meaning and an associated measure of co-movement is not existing in the economic literature. This paper introduces a definition for co-movement and a measure that fits precisely to the notion of co-movement. The measure provides estimates for bi-variant and multivariate time series for every time t. A simulation study describes the properties of this measure and an empirical analysis of monthly stock market index returns shows that the co-movement has increased in recent years and that there is a varying asymmetry of negative and positive co-movements.

Additional information

Authors: BAUR D, European Commission, Joint Research Centre, Institute for the Protection and the Security of the Citizen, Technological and Economic Risk Management Unit, Ispra (IT)
Bibliographic Reference: EUR 20759 EN (2003), 31pp. Free of charge
Availability: Available from European Commission, JRC Knowledge Management Unit, Ispra (IT) Tel: +39 033278 9843 or +39 033278 9864 Fax: +39 033278 9623 E-mail:
Record Number: 200316535 / Last updated on: 2003-08-18
Original language: en
Available languages: en