Equity prices and macroeconomic fundamentals: International evidence

Laopodis, Nikiforos T.

doi:10.1016/j.intfin.2010.10.006

Cited by 52 publications

(34 citation statements)

References 33 publications

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“…From a methodological point of view, the empirical literature has proposed different measurement frameworks relying on price-based indicators: Vector Auto-Regression (VAR) models (Khalid and Kawai, 2003;Elyasiani and Wanli, 2008;Jayasuriya, 2011), standard cross-country correlation (Watson, 1980;Meric and Meric, 1989;Goetzmann et al, 2005), cointegration and error-correction models (Laopodis, 2011;Gupta and Guidi, 2012), GARCH models (Kim et al, 2006;Carrieri et al, 2007;Wang and Moore, 2008;Egert and Kocenda, 2011), asset pricing models (Nellis, 1982;Mauro et al, 2002;de Jong and de Roon, 2005;Barr and Priestley, 2004;Abad et al, 2010;Volosovych, 2011;Donadelli and Paradiso, 2014), and common component approach (Carrieri et al, 2007;Pukthuanthong and Roll, 2009;Yu et al, 2010). VAR-based studies make use of impulse response analysis to investigate the effects of contagion and the degree of interdependence, whereas cointegration-based studies aim to assess the presence of a long-run equilibrium among cross-country financial variables, such as stock or bond prices.…”

Section: Introductionmentioning

confidence: 99%

Which market integration measure?

Billio

Donadelli

Paradiso

et al. 2017

Journal of Banking & Finance

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This paper compares the dynamics of the financial integration process as described by different empirical approaches. To this end, a wide range of measures accounting for several dimensions of integration is employed. In addition, we evaluate the performance of each measure by relying on an established international finance result, i.e., increasing financial integration leads to declining international portfolio diversification benefits. Using monthly equity market data for three different country groups (i.e., developed markets, emerging markets, developed plus emerging markets) and a dynamic indicator of international portfolio diversification benefits, we find that (i) all measures give rise to a very similar long-run integration pattern; (ii) the standard correlation explains variations in diversification benefits as well or better than more sophisticated measures. These findings are robust to a battery of robustness checks.

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Section: Introductionmentioning

confidence: 99%

Which market integration measure?

Billio

Donadelli

Paradiso

et al. 2017

Journal of Banking & Finance

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show abstract

“…The VAR method for obtaining unexpected changes in macroeconomic variables is often applied in the literature, for example, by Brown and Otsuki (1993) or Laopodis (2011). It goes without saying that this procedure is even more important for our sentiment proxies.…”

Section: Procedures Of the Analysismentioning

confidence: 99%

“…The risk factors of an APT model are assumed to represent the systematic risk and are usually captured by the unexpected changes in the state of the economy. Unfortunately, there are not any theoretical specifications with regard to the selection of these factors and therefore it is most reasonable to chose those macroeconomic variables that were already proven as relevant by previous studies (for example Chen et al, 1986;Brown and Otsuki, 1993;Harvey, 1991, 1995;Oertmann, 1997;Laopodis, 2011). Our set of selected macroeconomic factors include changes in industrial production, inflation and interest rates as well as changes in oil prices and the excess market return.…”

Section: Risk Factorsmentioning

confidence: 99%

The pricing of sentiment risk in European stock markets

Keiber

Samyschew

2018

The European Journal of Finance

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This paper studies whether sentiment is rewarded with a significant risk premium on the European stock markets. We examine several sentiment proxies and identify the Economic Sentiment Indicator (ESI) from the EU Commission as the most relevant sentiment proxy for our sample. The analysis is performed for the contemporaneous excess returns of eleven euro area (EA-11) stock markets in the period from February 1999 to September 2015. We apply a conditional multiplebeta pricing model in order to track the variation of the sentiment risk premium over time. The results demonstrate a positive significant relationship between sentiment and contemporaneous excess returns which is consistent to the previous studies. The calculated sentiment risk premium is significant as well but of a negative sign implying that an investment in EA-11 countries over the examined time period would have been unattractive to the investors on average.

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“…They found that when the global stock market was in the uptick, the relationship between Japanese stock market and ~ 24 ~ other countries' will tend to be close (Chong, Wong & Yan, 2008). Laopodis (2011) studied the relationship between the United States, Britain, France, Germany and Italy through rolling sample co-integration analysis and VAR model. The results show that a country's economic base is of greatest importance of the linkage between stock markets before the establishment of the euro area.…”

Section: Literature Reviewmentioning

confidence: 99%

Spillover Effects among the Main Stock Markets in China’s Capital Market Opening Process

Liao¹,

Yin²,

Wu³

et al. 2017

JFE

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With the opening and development of China's capital market, mainland China and the world's stock market is increasingly close. This paper explores the volatility spillover effect between China's stock market and the world's major ones to study the transmission path of stock market risk and provides policy suggestions for promoting development of China's stock market. We selected daily returns of four large indices from December 26, 1996 to March 1, 2016 as the main object to study and analyze Shanghai Composite Index, Hong Kong Hang Seng Index, American Dow Jones Index, and British Financial Times Index. According to the different degree of openness of China's capital market, the samples are divided into five sub-stages. Granger test and DCC-MGARCH model are used to analyze the causal relationship and dynamic correlation of the mainland stock market and the major ones in the world. To avoid the volatility and risks, we found corresponding measures. The empirical results show that the implementation of WTO and the QFII system cannot effectively promote the internationalization of the stock market in China. However, the exchange rate reform of RMB and Shanghai-Hong Kong Stock Connect Program have greatly improved the linkage between Chinese and international stock markets. JEL Classifications: G15, F30, D00

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Equity prices and macroeconomic fundamentals: International evidence

Cited by 52 publications

References 33 publications

Which market integration measure?

Which market integration measure?

The pricing of sentiment risk in European stock markets

Spillover Effects among the Main Stock Markets in China’s Capital Market Opening Process

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