The Determinants of Stock Returns in a Small Open Economy
AbstractThis paper examines the determinants of stock returns in a small open economy using an APT framework. The analysis is conducted for the Swiss stock market which has the particularity of including a large proportion of firms that are exposed to foreign economic conditions. Both a statistical and a macroeconomic implementation of the model are performed for the period 1986-2002 with monthly returns on industrial sector indices. The results show that the statistically determined factors yield a better representation of the determinants of stock returns than the macroeconomic variables and that stock returns are influenced by both global and local economic conditions. This suggests that the Swiss stock market is an internationally imperfectly integrated market.
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Bibliographic InfoPaper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp54.
Date of creation: May 2003
Date of revision:
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Statistical APT; Macroeconomic APT; Market integration; Risk factors;
Other versions of this item:
- Cauchie, Severine & Hoesli, Martin & Isakov, Dusan, 2004. "The determinants of stock returns in a small open economy," International Review of Economics & Finance, Elsevier, vol. 13(2), pages 167-185.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-16 (All new papers)
- NEP-CFN-2005-04-16 (Corporate Finance)
- NEP-FIN-2005-04-16 (Finance)
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