Alternatively, stronger correlation may reflect a change in the willingness of investors in different countries to accept price volatility: if investors are more risk averse, they will insist on a higher return for the risks they bear by holding shares, so share prices would have to fall.

ECONOMIST: All fall down | The

The ratio is closely watched because as Ferrarone notes it shows a high degree of correlation to the year-over-year change in the OECD leading indicators, which in turn closely corresponds to market returns.

FORBES: Stocks Are Cheap Enough To Absorb Earnings Downgrades

Each marker on the correlation lines in Figure 1 signifies a 10 percent change in asset allocation from Asset Class A to Asset Class B.

FORBES: Basics of Asset Allocation (Part 2 of 2)