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Cash Flows and Discount Rates, Industry and Country Effects and Co‐Movement in Stock Returns
Author(s) -
Ammer John,
Wongswan Jon
Publication year - 2007
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2007.00168.x
Subject(s) - stock (firearms) , dividend , economics , financial economics , equity (law) , common stock , monetary economics , business , finance , context (archaeology) , political science , law , mechanical engineering , paleontology , biology , engineering
We apply the Campbell decomposition to industry‐by‐country, national, global industry, and world stock index returns using 1995–2003 data. World, global industry, and country factors are all important for each of the two key components of stock returns: news about future dividends and news about future discount rates. Furthermore, the world component of future discount rates is more important than the idiosyncratic component, while the reverse is true for news about future dividends. Our results are broadly consistent with co‐movement in future discount rates arising from perceptions of common elements of risk in international equity markets.