Stock return predictability and market integration: The role of global and local information

McMillan, David G.

doi:10.1080/23322039.2016.1178363

Cited by 3 publications

(2 citation statements)

References 15 publications

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“…Here, we estimate a regression of home market returns on contemporaneous US market returns and obtain the residual. This residual, thus, captures home market information that is adjusted for (orthogonal to) US information, and this approach follows that in Stehle (1977), McMillan (2016) and Lawrenz and Zorn (2018).…”

Section: Empirical Results For Causality and Spilloversmentioning

confidence: 99%

Interrelation and spillover effects between stocks and bonds: cross-market and cross-asset evidence

McMillan

2020

SEF

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Purpose This paper aims to examine the behaviour, both contemporaneous and causal, of stock and bond markets across four major international countries. Design/methodology/approach The authors generate volatility and correlations using the realised volatility approach and implement a general vector autoregression approach to examine causality and spillovers. Findings While results confirm that same asset-cross country return correlations and spillovers increase over time, the same in not true with variance and covariance behaviour. Volatility spillovers across countries exhibit a substantial amount of time variation; however, there is no evidence of trending in any direction. Equally, cross asset – same country correlations exhibit both negative and positive values. Further, the authors report an inverse relation between same asset – cross country return correlations and cross asset – same country return correlations, i.e. the stock return correlation across countries increases at the same time the stock and bond return correlation within each country declines. Moreover, the results show that the stock and bond return correlations exhibit commonality across countries. The results also demonstrate that stock returns lead movement in bond returns, while US stock and bond returns have predictive power other country stock and bond returns. In terms of the markets analysed, Japan exhibits a distinct nature compared with those of Germany, the UK and USA. Originality/value The results presented here provide a detailed characterisation of how assets interact both with each other and cross-countries and should be of interest to portfolio managers, policy-makers and those interested in modelling cross-market behaviour. Notably, the authors reveal key differences between the behaviour of stocks and bonds and across different countries.

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Section: Empirical Results For Causality and Spilloversmentioning

confidence: 99%

Interrelation and spillover effects between stocks and bonds: cross-market and cross-asset evidence

McMillan

2020

SEF

Self Cite

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show abstract

“…Here, we estimate a regression of home market returns on contemporaneous US market returns and obtain the residual. This residual thus captures home market information that is adjusted for (orthogonal to) US information and this approach follows that in Stehle (1977), McMillan (2016 and Lawrenz and Zorn (2018).…”

Section: Mean and Variance Causality And Spillovers Across Assetsmentioning

confidence: 99%

Interrelation and Spillover Effects Between Stocks and Bonds: Cross-Market and Cross-Asset Evidence

McMillan

2019

SSRN Journal

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This paper examines the behaviour, both contemporaneous and causal, of stock and bond markets across four major international countries.Design/Methodology/Approach: We generate volatility and correlations using the realised volatility approach and implement a general VAR approach to examine causality and spillovers. Findings:While results confirm that same asset-cross country return correlations and spillovers increase over time, the same in not true with variance and covariance behaviour. Volatility spillovers across countries exhibit a substantial amount of time-variation, however, there is no evidence of trending in any direction. Equally, cross asset-same country correlations exhibit both negative and positive values. Further, we report an inverse relation between same asset-cross country return correlations and cross asset-same country return correlations i.e., the stock return correlation across countries increases at the same time the stock and bond return correlation within each country declines. Moreover, results show that the stock and bond return correlations exhibit commonality across countries. Results also demonstrate that stock returns lead movement in bond returns, while US stock and bond returns have predictive power other country stock and bond returns. In terms of the markets analysed, Japan exhibit a distinct nature compared with those of Germany, the UK and the US. OriginalityThe results presented here provide a detailed characterisation of how assets interact both with each other and cross countries and should be of interest to portfolio managers, policy-makers and those interested in modelling cross market behaviour. Notably, we reveal key differences between the behaviour of stocks and bonds and across different countries.

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Decomposing the predictive power of local and global financial valuation ratios

Lawrenz

Zorn

2018

The Quarterly Review of Economics and Finance

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Stock return predictability and market integration: The role of global and local information

Cited by 3 publications

References 15 publications

Interrelation and spillover effects between stocks and bonds: cross-market and cross-asset evidence

Interrelation and spillover effects between stocks and bonds: cross-market and cross-asset evidence

Interrelation and Spillover Effects Between Stocks and Bonds: Cross-Market and Cross-Asset Evidence

Decomposing the predictive power of local and global financial valuation ratios

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