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Country governance and international equity returns

Ben R. Marshall, Hung T. Nguyen, Nhut H. Nguyen and Nuttawat Visaltanachoti ()
Authors registered in the RePEc Author Service: Harvey Nguyen ()

Journal of Banking & Finance, 2021, vol. 122, issue C

Abstract: Monthly returns in countries with strong governance lead monthly returns in weak governance countries. This predictability holds in and out-of-sample at both the group and individual country levels. Moreover, the predictability is not fully explained by other related possible sources of cross-country predictability such as differences in country development, political risk, size, liquidity, short-selling constraints, the predictive ability of U.S. equity returns, or non-synchronous trading. It appears that equity returns in different countries react to value-relevant world information at different speeds based on their levels of country governance.

Keywords: Governance; Return predictability; Information diffusion (search for similar items in EconPapers)
JEL-codes: G11 G14 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jbankfin.2020.105986

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