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This study applies the Sequential Panel Selection Method (SPSM) to test the mean reversion properties in the real interest rates for the G-10 countries (i.e. Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom and the United States) over the period 1980M1 to 2010M12. SPSM classifies the whole panel into a group of stationary countries and a group of nonstationary countries. In doing so, we can clearly identify how many and which series in the panel are stationary processes. Empirical results from the SPSM using the Panel Kapetanios et al. (KSS; 2003) test with a Fourier function indicate that the mean reversion holds true for all the G-10 countries. Our results have important policy implications for the G-10 countries under study. [ABSTRACT FROM AUTHOR]

This article investigates the dependence of G10 countries' equity markets on the US market, particularly when the US experiences upturns or downturns in the market. If indeed the dependence is high in the downturn market, then investors will not benefit from international diversification when it is mostly needed. Using daily returns on the stock markets of G11 countries, this study estimates Pearson and rank correlations of G10 markets conditional on the US market falling below and rising above certain levels. The rank correlation is robust to outliers and hence provides stronger evidence than its counterpart. When the US market falls, the dependence between the US market and G10 countries has become notably stronger than that during bull markets, except for Sweden. The observed higher dependence in the bear market is of concern for investors, because it erodes the benefit of international diversification. [ABSTRACT FROM AUTHOR]