Stock return comovements and economic wealth conditions

The aim of this paper is to provide empirical evidence of stock return comovement and to find a connection with the main US wealth indices. The methodology used in this work is based on two analyses: principal component analysis and factor analysis. These analyses allow us to detect the number of components or factors that drive the stock market. We define the financial concentration as the condition in which the stock market index depends on a low number of factors or components. The panel analyses applied here allow us to develop time series indicators. Our results show a high positive correlation between wealth indices and stock return comovements, highlighting the connection between the stock market and population wellbeing.