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A Global Version of Samuelson's Dictum†

A Global Version of Samuelson's Dictum† AbstractSamuelson’s Dictum refers to the conjecture that there is more informational inefficiency at the aggregate stock market level than at the individual stock level. Our paper recasts it in a global setup: there should be more informational inefficiency at the global level than at the country level. We find that sovereign CDS spreads can predict future stock market index returns, GDP, and PMI of their underlying countries. Consistent with the global version of Samuelson’s Dictum, the predictive power for both stock returns and macro variables is almost entirely from the global, rather than country-specific, information from the sovereign CDS market. (JEL G12, G14, G17) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review: Insights American Economic Association

A Global Version of Samuelson's Dictum†

A Global Version of Samuelson's Dictum†

American Economic Review: Insights , Volume 4 (2) – Jun 1, 2022

Abstract

AbstractSamuelson’s Dictum refers to the conjecture that there is more informational inefficiency at the aggregate stock market level than at the individual stock level. Our paper recasts it in a global setup: there should be more informational inefficiency at the global level than at the country level. We find that sovereign CDS spreads can predict future stock market index returns, GDP, and PMI of their underlying countries. Consistent with the global version of Samuelson’s Dictum, the predictive power for both stock returns and macro variables is almost entirely from the global, rather than country-specific, information from the sovereign CDS market. (JEL G12, G14, G17)

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Publisher
American Economic Association
Copyright
Copyright © 2022 © American Economic Association
ISSN
2640-205X
eISSN
2640-2068
DOI
10.1257/aeri.20210186
Publisher site
See Article on Publisher Site

Abstract

AbstractSamuelson’s Dictum refers to the conjecture that there is more informational inefficiency at the aggregate stock market level than at the individual stock level. Our paper recasts it in a global setup: there should be more informational inefficiency at the global level than at the country level. We find that sovereign CDS spreads can predict future stock market index returns, GDP, and PMI of their underlying countries. Consistent with the global version of Samuelson’s Dictum, the predictive power for both stock returns and macro variables is almost entirely from the global, rather than country-specific, information from the sovereign CDS market. (JEL G12, G14, G17)

Journal

American Economic Review: InsightsAmerican Economic Association

Published: Jun 1, 2022

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