International Evidence for Return Predictability and the Implications for Long-Run Covariation of the G7 Stock Markets
Temporary fluctuations of the US consumption-wealth ratio do not only predict excess returns on the US but also international stock markets at the business cycle frequency. This finding is the reflection of a common, temporary component in national stock markets. Exposure to this common component explains up to 50% of the pairwise covariation among long-horizon returns on the G7 stock markets for the time period from 1970 to 2008. This latter finding is less pronounced in the post-1990s period. Copyright 2010 The Author. German Economic Review 2010 Verein für Socialpolitik.
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Volume (Year): 11 (2010)
Issue (Month): (November)
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