The ‘excess co-movement puzzle’ in financial markets refers to the correlation of asset returns beyond what could be expected based on the common movements in fundamentals. Using international data, this column links excess co-movement in firm-level stock returns to the correlated beliefs of sophisticated investors. Co-movement is largely explained by investors’ reliance on common information – in other words, their lack of firm-specific information. This gives rise, in part, to the higher degree of aggregate market-wide volatility.