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

  • John Ammer
  • Jon Wongswan

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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Article provided by Eastern Finance Association in its journal Financial Review.

Volume (Year): 42 (2007)
Issue (Month): 2 (05)
Pages: 211-226

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Handle: RePEc:bla:finrev:v:42:y:2007:i:2:p:211-226
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  1. John Ammer & Jianping Mei, 1993. "Measuring international economic linkages with stock market data," International Finance Discussion Papers 449, Board of Governors of the Federal Reserve System (U.S.).
  2. Ammer, John & Campbell, John, 1993. "What Moves the Stock and Bond Markets? A Variance Decomposition for Long-Term Asset Returns," Scholarly Articles 3382857, Harvard University Department of Economics.
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