The New Economy and Global Stock Returns
Luis Catão () and
No 00/216, IMF Working Papers from International Monetary Fund
This paper revisits the relative importance of global versus country-specific factors underlying stock returns. It constructs a new firm level data set covering emerging and developed markets and estimates a simple factor model, which breaks down stock returns into a global business cycle factor, global industry factors, country-specific factors and firm-level effects. The results indicate that the share of variation in stock returns explained by global industry factors has grown sharply since the mid-1990s, at the expense of country-specific factors. Foremost among the global factors is a “new economy” factor, which has become a key determinant of global stock returns.
Keywords: Economic models; Stock markets; portfolio diversification, international financial integration, new economy, stock returns, stock market, equity markets, standard deviations, standard deviation (search for similar items in EconPapers)
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