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The New Economy and Global Stock Returns

Robin Brooks and Luis Catão ()

No 2000/216, IMF Working Papers from International Monetary Fund

Abstract: 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: WP; company; factor; stock markets; portfolio diversification; international financial integration; new economy; industry factor; factor return variance; emerging markets company; industry-affiliation factor rise; factor model; country factor; merger company; only firm; high-tech company; time series; Stocks; Emerging and frontier financial markets; Market capitalization; Global; Africa (search for similar items in EconPapers)
Pages: 39
Date: 2000-12-01
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