Selecting Macroeconomic Variables as Explanatory Factors of Emerging Stock Market Returns

30 Pages Posted: 2 May 2000

See all articles by Chris Bilson

Chris Bilson

Australian National University (ANU) - Faculty of Economics & Commerce

Tim Brailsford

Bond University

Vincent J. Hooper

SP Jain School of Global Management

Date Written: November 1999

Abstract

Emerging stock markets have been identified as being at least partially segmented from global capital markets. As a consequence, it has been argued that local risk factors rather than world risk factors are the primary source of equity return variation in these markets. This paper seeks to address the question of whether macroeconomic variables may proxy for local risk sources. We find moderate evidence to support this hypothesis. Further, we investigate the degree of commonality in exposures across emerging stock market returns using a principal components approach. We find little evidence of commonality when emerging markets are considered collectively, however at the regional level considerable commonality is found to exist.

JEL Classification: G1

Suggested Citation

Bilson, Chris and Brailsford, Timothy John and Hooper, Vincent James, Selecting Macroeconomic Variables as Explanatory Factors of Emerging Stock Market Returns (November 1999). Available at SSRN: https://ssrn.com/abstract=201908 or http://dx.doi.org/10.2139/ssrn.201908

Chris Bilson (Contact Author)

Australian National University (ANU) - Faculty of Economics & Commerce ( email )

Canberra, Australian Capital Territory 2601
Australia
+61 2 6249 3664 (Phone)
+61 2 6249 5005 (Fax)

Timothy John Brailsford

Bond University ( email )

Gold Coast, QLD 4229
Australia

HOME PAGE: http://www.bond.edu.au

Vincent James Hooper

SP Jain School of Global Management ( email )