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Cashflow news, the value premium and an asset pricing view on European stock market integration

  • Thomas Nitschka

The decomposition of national CAPM market betas of European countries� value and growth portfolio returns into cashflow and discount rate news driven components reveals that i) high average returns on value portfolios are associated with disproportionately high sensitivity to national cashflow news which corroborates recent evidence for the U.S. and ii) two-beta variants of national CAPMs capture the cross-sectional dispersion in European stock returns. The latter finding is suggestive of relatively well integrated stock markets among the core European countries and reflects basic asset pricing theory. One (national) discount factor should price any (international) asset.

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Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 339.

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Date of creation: Nov 2007
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Handle: RePEc:zur:iewwpx:339
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