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What factors affect the Oslo Stock Exchange?

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  • Randi Næs

    (Norges Bank (Central Bank of Norway))

  • Johannes A. Skjeltorp

    ()
    (Norges Bank (Central Bank of Norway))

  • Bernt Arne Ødegaard

    (University of Stavanger and Norges Bank)

Abstract

This paper analyzes return patterns and determinants at the Oslo Stock Exchange (OSE) in the period 1980-2006. We find that a three-factor model containing the market, a size factor and a liquidity factor provides a reasonable fit for the cross-section of Norwegian stock returns. As expected, oil prices significantly affect cash flows of most industry sectors at the OSE. Oil is, however, not a priced risk factor in the Norwegian stock market. As the case in many other countries, we find that macroeconomic variables affect stock prices, but since we find only weak evidence of these variables being priced in the market, the most reasonable channel for these effects is through company cash flows.

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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2009/24.

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Length: 61 pages
Date of creation: 05 Nov 2009
Date of revision:
Handle: RePEc:bno:worpap:2009_24

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Keywords: Stock Market Valuation; Asset Pricing; Factor Models; Generalized; Method of Moments;

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  1. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, 09.
  2. Maria Vassalou & Yuhang Xing, 2004. "Default Risk in Equity Returns," Journal of Finance, American Finance Association, vol. 59(2), pages 831-868, 04.
  3. Josef Lakonishok & Andrei Shleifer & Robert W. Vishny, 1993. "Contrarian Investment, Extrapolation, and Risk," University of Chicago - George G. Stigler Center for Study of Economy and State 84, Chicago - Center for Study of Economy and State.
  4. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
  5. La Porta, Rafael, et al, 1997. " Good News for Value Stocks: Further Evidence on Market Efficiency," Journal of Finance, American Finance Association, vol. 52(2), pages 859-74, June.
  6. John Lintner, 1965. "Security Prices, Risk, And Maximal Gains From Diversification," Journal of Finance, American Finance Association, vol. 20(4), pages 587-615, December.
  7. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-87, September.
  8. Shefrin, Hersh & Statman, Meir, 1985. " The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence," Journal of Finance, American Finance Association, vol. 40(3), pages 777-90, July.
  9. Fama, Eugene F, 1990. " Stock Returns, Expected Returns, and Real Activity," Journal of Finance, American Finance Association, vol. 45(4), pages 1089-1108, September.
  10. Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, vol. 13(3), pages 341-360, December.
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Cited by:
  1. Naes, Randi & Ødegaard, Bernt Arne, 2009. "Liquidity and Asset Pricing: Evidence on the Role of Investor Holding Period," UiS Working Papers in Economics and Finance 2009/19, University of Stavanger.
  2. Ødegaard, Bernt Arne, 2009. "Who moves stock prices? Monthly evidence," UiS Working Papers in Economics and Finance 2009/4, University of Stavanger.

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