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Cash Flows and Discount Rates, Industry and Country Effects and Co-Movement in Stock Returns

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  • John Ammer
  • Jon Wongswan

Abstract

We apply the Campbell decomposition to industry-by-country, national, global industry, and world stock index returns using 1995-2003 data. World, global industry, and country factors are all important for each of the two key components of stock returns: news about future dividends and news about future discount rates. Furthermore, the world component of future discount rates is more important than the idiosyncratic component, while the reverse is true for news about future dividends. Our results are broadly consistent with co-movement in future discount rates arising from perceptions of common elements of risk in international equity markets. Copyright 2007, The Eastern Finance Association.

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  • John Ammer & Jon Wongswan, 2007. "Cash Flows and Discount Rates, Industry and Country Effects and Co-Movement in Stock Returns," The Financial Review, Eastern Finance Association, vol. 42(2), pages 211-226, May.
  • Handle: RePEc:bla:finrev:v:42:y:2007:i:2:p:211-226
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    Cited by:

    1. Boyle, Glenn, 2009. "Capital Market Integration: A Review of the Issues and an Assessment of New Zealand's Position," Working Paper Series 4034, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    2. Bredin, Don & Hyde, Stuart, 2011. "Investigating sources of unanticipated exposure in industry stock returns," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1128-1142, May.
    3. Nave, Juan M. & Ruiz, Javier, 2015. "Risk aversion and monetary policy in a global context," Journal of Financial Stability, Elsevier, vol. 20(C), pages 14-35.
    4. Jinjarak, Yothin, 2014. "Equity prices and financial globalization," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 49-57.

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