International evidence for return predictability and the implications for long-run covariation of the G7 stock markets

Thomas Nitschka

No 338, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: Temporary fluctuations of the U.S. consumption-wealth ratio, cay, predict excess returns on international stock markets at the business cycle frequency. This finding is the reflection of a common, temporary component in national stock markets. Exposure to this common component explains up to 60 percent of the covariation among long-horizon returns on the G7 stock markets for the time period from 1973 to 2005. The impact of the common component on stock market comovement is particularly pronounced in the period from 1990 to 2005.

Keywords: U.S. consumption-wealth ratio; stock market comovement; stock return predictability (search for similar items in EconPapers)
JEL-codes: E21 G12 (search for similar items in EconPapers)
Date: 2007-11
New Economics Papers: this item is included in nep-mac and nep-rmg
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: International Evidence for Return Predictability and the Implications for Long‐Run Covariation of the G7 Stock Markets (2010)
Journal Article: International Evidence for Return Predictability and the Implications for Long-Run Covariation of the G7 Stock Markets (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zur:iewwpx:338

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