Please use this identifier to cite or link to this item: http://hdl.handle.net/1893/24663
Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: Stock return predictability and market integration: The role of global and local information
Authors: McMillan, David
Contact Email: david.mcmillan@stir.ac.uk
Keywords: stock returns
predictability
global information
principal components
forecasting
Issue Date: 21-May-2016
Citation: McMillan D (2016) Stock return predictability and market integration: The role of global and local information, Cogent Economics and Finance, 4, Art. No.: 1178363.
Abstract: This paper examines the predictability of a range of international stock markets where we allow the presence of both local and global predictive factors. Recent research has argued that US returns have predictive power for international stock returns. We expand this line of research, following work on market integration, to include a more general definition of the global factor, based on principal components analysis. Results identify three global expected returns factors, one related to the major stock markets of the US, UK and Asia and one related to the other markets analysed. The third component is related to dividend growth. A single dominant realised returns factor is also noted. A forecasting exercise comparing the principal components based factors to a US return factor and local market only factors, as well as the historical mean benchmark finds supportive evidence for the former approach. It is hoped that the results from this paper will be informative on three counts. First, to academics interested in understanding the dynamics asset price movement. Second, to market participants who aim to time the market and engage in portfolio and risk management. Third, to those (policy makers and others) who are interested in linkages across international markets and the nature and degree of integration.
DOI Link: http://dx.doi.org/10.1080/23322039.2016.1178363
Rights: © 2016 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license.

Files in This Item:
File Description SizeFormat 
23322039.2016.1178363.pdf582.91 kBAdobe PDFView/Open



This item is protected by original copyright



Items in the Repository are protected by copyright, with all rights reserved, unless otherwise indicated.

If you believe that any material held in STORRE infringes copyright, please contact library@stir.ac.uk providing details and we will remove the Work from public display in STORRE and investigate your claim.