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Foreign dependence of individual stock prices: The role of aggregate product market developments

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  • Filip Abraham
  • Hilde Leliaert
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    Abstract

    In this paper, we analyze the role of aggregate variables in the transmission from international stock price developments to individual domestic stock prices in a small open stock market. In particular, a theoretical and econometric model is used to determine whether international aggregate product market developments explain observed differences in foreign dependence among individual Belgian stocks. The results suggest that, except for the stocks of some internationally oriented companies, expected international production is not the most important explanatory variable and that an estimation model of aggregate fundamentals explains only part of individual stock price adjustments. Copyright Kluwer Academic Publishers 1991

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    File URL: http://hdl.handle.net/10.1007/BF01886132
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    Bibliographic Info

    Article provided by Springer in its journal Open Economies Review.

    Volume (Year): 2 (1991)
    Issue (Month): 1 (February)
    Pages: 1-26

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    Handle: RePEc:kap:openec:v:2:y:1991:i:1:p:1-26

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    Web page: http://www.springerlink.com/link.asp?id=100323

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    Keywords: stock prices; international economic activity; cointegration;

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    1. Hamao, Yasushi & Campbell, John, 1992. "Predictable Stock Returns in the United States and Japan: A Study of Long-Term Capital Market Integration," Scholarly Articles 3207694, Harvard University Department of Economics.
    2. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
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    4. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
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    9. Robert B. Barsky, 1986. "Why Don't the Prices of Stocks and Bonds Move Together?," NBER Working Papers 2047, National Bureau of Economic Research, Inc.
    10. Gerald P. Dwyer, Jr. & R.W. Hafer, 1988. "Are national stock markets linked?," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 3-14.
    11. Boyle, Glenn W & Young, Leslie, 1988. "Asset Prices, Commodity Prices, and Money: A General Equilibrium, Rational Expectations Model," American Economic Review, American Economic Association, vol. 78(1), pages 24-45, March.
    12. Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December.
    13. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
    14. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November.
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