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University of Rochester

1. Kornienko, Stanislav (1982 - ). Essays on comovement of equity and currency returns.

Degree: PhD, 2011, University of Rochester

In this dissertation we document a large positive correlation between the financial index return of a home country minus a rest-of-the world portfolio return, where both are measured in the home currency, and the return on a domestic currency basket index. This equity-currency comovement holds for all of our 19 OECD countries with free-floating exchange rates. This correlation implies that domestic equity market performance compared to “the rest of the world” comoves with its currency performance. We also provide additional evidence of equity-currency comovement for country pairs, by emphasizing positive correlation between foreign minus home equity markets’ returns both measured in home currency and foreign currency returns. We proceed to document that for any pair of the countries the volatility of the difference between equity market returns measured in local currencies is always greater than that of the bilateral exchange rate. This finding yields an upper bound for the correlation corresponding to equity currency comovement. A two-country complete markets model with CRRA preferences and inter-country correlated long-run shocks to consumption growth helps explain such equity-currency comovement. We emphasize that it is not the case that currency returns drive relative equity returns across countries or vice versa. We show that equity-currency comovement is a result of the dynamics of relative short-run and relative long-run consumption growth shocks across countries. For our 19 OECD countries we document that the correlation between foreign minus domestic equity returns, both measured in local currencies, and foreign currency returns is positive for roughly half of the country pairs and negative for the others. The model with CRRA preferences predicts that such a correlation must be negative and thus fails to account for a possible positive sign. We show that a combination of long-run risks and Epstein-Zin preferences is sufficient to yield either sign for this correlation.

Subjects/Keywords: Equity-currency comovement

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APA (6th Edition):

Kornienko, S. (. -. ). (2011). Essays on comovement of equity and currency returns. (Doctoral Dissertation). University of Rochester. Retrieved from

Chicago Manual of Style (16th Edition):

Kornienko, Stanislav (1982 - ). “Essays on comovement of equity and currency returns.” 2011. Doctoral Dissertation, University of Rochester. Accessed September 29, 2020.

MLA Handbook (7th Edition):

Kornienko, Stanislav (1982 - ). “Essays on comovement of equity and currency returns.” 2011. Web. 29 Sep 2020.


Kornienko S(-). Essays on comovement of equity and currency returns. [Internet] [Doctoral dissertation]. University of Rochester; 2011. [cited 2020 Sep 29]. Available from:

Council of Science Editors:

Kornienko S(-). Essays on comovement of equity and currency returns. [Doctoral Dissertation]. University of Rochester; 2011. Available from: