International Comparisons on Stock Market Short-Termism: How Different is the UK Experience?

Posted: 30 Nov 2000

See all articles by Angela J. Black

Angela J. Black

University of Aberdeen - Business School

Patricia Fraser

Curtin University of Technology - Curtin Business School - Bentley Campus; University of Aberdeen - Business School

Abstract

Using data from five major stock markets and a vector autoregression estimation procedure underpinned by the traditional intertemporal capital asset pricing model, initial evidence suggests that the UK investing community is particularly prejudiced in terms of short-termist behaviour. The observed UK myopic outlook, however, may be more apparent than real. We hypothesize that UK investors are highly sensitive to uncertainty over future cash flows - a feature which is not being captured by traditional theoretical models. Motivated by the "option value" approach, the evidence shows that uncertainty about UK economic conditions, as proxied by the spread between mortgage rates and base rates, can go some way in explaining the reported UK anomaly.

Suggested Citation

Black, Angela J. and Fraser, Patricia, International Comparisons on Stock Market Short-Termism: How Different is the UK Experience?. Available at SSRN: https://ssrn.com/abstract=242524

Angela J. Black (Contact Author)

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom
+44 0 1224 273316 (Phone)

Patricia Fraser

Curtin University of Technology - Curtin Business School - Bentley Campus ( email )

GPO Box U1987
Perth WA 6845
Australia

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

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