Český finanční a účetní časopis 2026(1):21-44 | DOI: 10.18267/j.cfuc.627

The Correlation between World Stock Markets over the Past Three Decades and its Impact on Portfolio Risk

Jitka Veselá, Alžběta Zíková

This paper focuses on the issue of portfolio risk diversification using international investing in the context of the variability of the mutual correlation of global stock market movements over the past three decades. The study examined 11 stock markets, namely the markets in the Czech Republic, Germany, Great Britain, Spain, USA, Canada, Brazil, Japan, China and Australia.The results clearly show the growth of the correlation of the monitored stock markets in the last 30 years and at the same time the relatively strong level of correlation of the developed world stock markets. A significant increase in the correlation between markets occurs during periods of crises, turbulence and negative events, which usually start a bear market, while in bull periods the correlation between markets decreases significantly. The anticyclical movement of the correlation between markets compared to the development of these markets should be taken into account by investors when making decisions about the design and layering of portfolios with the aim of diversifying risk.

Keywords: stock index; risk diversification; international investing; correlation coefficient; bear market, bull market
JEL classification: G11, G15

Published: May 23, 2026  Show citation

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Veselá, J., & Zíková, A. (2026). The Correlation between World Stock Markets over the Past Three Decades and its Impact on Portfolio Risk. Czech Financial and Accounting Journal, 2026(1), 21-44. doi: 10.18267/j.cfuc.627
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