EconPapers    
Economics at your fingertips  
 

World output gap and global stock returns

Victoria Atanasov

Journal of Empirical Finance, 2018, vol. 48, issue C, 181-197

Abstract: This paper shows that world output gap exhibits substantial in-sample and out-of-sample predictive power for global excess stock market returns. High world output gap today signals low expected returns in the future, consistent with a countercyclical equity risk premium. In contrast to the global economic growth which influences returns only at the end of the year, world output gap reveals stable and significant predictability all over the calendar year. Also, world output gap contains important predictive elements for local stock markets and often captures a larger fraction of return variation than the national output gap. Both cash-flow and discount-rate channels strongly reinforce the forecasting power of the world output gap.

Keywords: World output gap; Global stock returns; Predictability (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927539818300483
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:48:y:2018:i:c:p:181-197

Access Statistics for this article

Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2018-12-08
Handle: RePEc:eee:empfin:v:48:y:2018:i:c:p:181-197