International Evidence for Return Predictability and the Implications for Long-Run Covariation of the G7 Stock Markets

Thomas Nitschka

German Economic Review, 2010, vol. 11, issue 4, 527-544

Abstract: Temporary fluctuations of the US consumption-wealth ratio do not only predict excess returns on the US but also international stock markets at the business cycle frequency. This finding is the reflection of a common, temporary component in national stock markets. Exposure to this common component explains up to 50% of the pairwise covariation among long-horizon returns on the G7 stock markets for the time period from 1970 to 2008. This latter finding is less pronounced in the post-1990s period.

Keywords: US consumption-wealth ratio; stock market comovement; stock return predictability (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1111/j.1468-0475.2009.00494.x

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