Monetary integration and stock market cross-correlations during the interwar period: an international comparison between Belgium, France and the US
1 : Paris School of Economics
(PSE)
-
Site web
Paris School of Economics, PARIS SCHOOL OF ECONOMICS
48 boulevard Jourdan 75014 Paris -
France
2 : Institut Supérieur de Gestion
Institut Supérieur de Gestion
3 : EconomiX-CNRS, University of Paris Nanterre
(EconomiX)
Université Paris Ouest Nanterre La Défense
4 : EconomiX-CNRS, University of Paris Ouest Nanterre La Défense.
(EconomiX)
Université Paris Ouest Nanterre La Défense
This paper assesses the effect of monetary integration on correlations between the Belgian, French and US stock market returns during the interwar period (1919-1939) using high quality value-weighted stock price indices on monthly basis. Contrary to the common wisdom, we find that cross-correlations increased before the beginning of the international financial crisis of the 1930s.Financial linkages between stock markets tightened during the Gold Exchange Standard period, showing that monetary integration has strongly affected the co-movement of stock returns especially between the Belgian-US and the French-US stock markets.