Country world betas: The link between the stock market beta and macroeconomic beta
Numan Ülkü and
Finance Research Letters, 2014, vol. 11, issue 1, 36-46
We assess the connection between stock market linkages and macroeconomic linkages by using a world index model. Specifically, we test the association between the stock market beta (the sensitivity of country stock market index to world index) and macroeconomic betas (the sensitivity of national output and inflation to world output and inflation). Output betas account for about 20–26% of the cross-section of stock market betas. Controlling for previously-documented factors affecting stock market comovements: world output volatility is somewhat significant, while inflation betas, trade openness and world stock market volatility are insignificant in accounting for variation in stock market betas.
Keywords: Stock market comovement; Comovement of output and inflation; World beta; Macroeconomic beta (search for similar items in EconPapers)
JEL-codes: E32 G14 G15 (search for similar items in EconPapers)
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