The New Economy and Global Stock Returns

December 1, 2000

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Format: Chicago

Luis Catão, and Robin Brooks. The New Economy and Global Stock Returns, (USA: International Monetary Fund, 2000) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper revisits the relative importance of global versus country-specific factors underlying stock returns. It constructs a new firm level data set covering emerging and developed markets and estimates a simple factor model, which breaks down stock returns into a global business cycle factor, global industry factors, country-specific factors and firm-level effects. The results indicate that the share of variation in stock returns explained by global industry factors has grown sharply since the mid-1990s, at the expense of country-specific factors. Foremost among the global factors is a “new economy” factor, which has become a key determinant of global stock returns.

Subject: Emerging and frontier financial markets, Financial institutions, Financial markets, Market capitalization, Stock markets, Stocks, Technology

Keywords: Africa, Company, Country factor, Emerging and frontier financial markets, Emerging markets company, Factor, Factor model, Factor return variance, Global, High-tech company, Industry factor, Industry-affiliation factor rise, International financial integration, Market capitalization, Merger company, New economy, Only firm, Portfolio diversification, Stock markets, Stocks, Time series, WP

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/216
Stock No:

WPIEA2162000
ISBN:

9781451875089
ISSN:

1018-5941

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