Comovement in the Norwegian Stock Market

Abstract

We present the first comprehensive study of excess comovement in the Norwegian stock market, and find that stocks on the OBX index in Norway comove more than their fundamentals would suggest. The comovement is increasing over time, and of large economic magnitude after 2009. Between 2009 and 2018, our results indicate that 14% of the variance of OBX stocks stems from excess comovement. The OBX bases membership on volume traded, unlike previously researched indexes, which base membership on market capitalisation. Critics have suggested that index structure is the cause of previously found excess comovement, but our findings show that excess comovement exists even on differently structured indexes. Our findings therefore present new evidence in support of index membership causing excess comovement.