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New Information and Australian Equity Returns: A Multivariate Analysis

Author

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  • I. G. Sharpe

    (Department of Economics, University of Newcastle. The paper was completed while the author was Visiting Scholar at Stanford University. I would like to thank Paul Evans, Bert Hickman and a referee for their comments and assistance.)

Abstract

Utilising multivariate techniques the study investigates the relationship between new macroeconomic information and weekly Australian equity returns and tests the joint hypothesis of market efficiency and constant equilibrium expected equity returns (or constant risk premium). The joint hypothesis is strongly rejected for the 1978–1981 sample period. On the other hand, Australian equity returns are found to be significantly positively related to U.S. equity returns, growth of the monetary base, and the rate of change of the US$/A$ exchange rate.

Suggested Citation

  • I. G. Sharpe, 1983. "New Information and Australian Equity Returns: A Multivariate Analysis," Australian Journal of Management, Australian School of Business, vol. 8(1), pages 21-34, June.
    • Handle: RePEc:sae:ausman:v:8:y:1983:i:1:p:21-34
    DOI: 10.1177/031289628300800102
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    References listed on IDEAS

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    1. Saunders, Anthony & Tress, Richard B, 1981. "Inflation and Stock Market Returns: Some Australian Evidence," The Economic Record, The Economic Society of Australia, vol. 57(156), pages 58-66, March.
    2. Pesando, James E, 1979. "On the Random Walk Characteristics of Short- and Long-Term Interest Rates in an Efficient Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(4), pages 457-466, November.
    3. Abel, Andrew B. & Mishkin, Frederic S., 1983. "An integrated view of tests of rationality, market efficiency and the short-run neutrality of monetary policy," Journal of Monetary Economics, Elsevier, vol. 11(1), pages 3-24.
    4. David S. Jones & V. Vance Roley, 1982. "Rational Expectations, the Expectations Hypothesis, and Treasury Bill Yields: An Econometric Analysis," NBER Working Papers 0869, National Bureau of Economic Research, Inc.
    5. Hogan, W. P. & Sharpe, I. G. & Volker, P. A., 1982. "Capital market efficiency and the relationship between equity returns, interest rates, and monetary aggregates in Australia," Journal of Economics and Business, Elsevier, vol. 34(4), pages 377-385.
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    Cited by:

    1. Xiaoming Li & Jian Xu, 2002. "A note on New Zealand Stock Market efficiency," Applied Economics Letters, Taylor & Francis Journals, vol. 9(13), pages 879-883.

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