International stock return predictability: What is the role of the united states?

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Abstract

We investigate lead-lag relationships among monthly country stock returns and identify a leading role for the United States: lagged U.S. returns significantly predict returns in numerous non-U.S. industrialized countries, while lagged non-U.S. returns display limited predictive ability with respect to U.S. returns. We estimate a news-diffusion model, and the results indicate that return shocks arising in the United States are only fully reflected in equity prices outside of the United States with a lag, consistent with a gradual information diffusion explanation of the predictive power of lagged U.S. returns. © 2013 the American Finance Association.

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APA

Rapach, D. E., Strauss, J. K., & Zhou, G. (2013). International stock return predictability: What is the role of the united states? Journal of Finance, 68(4), 1633–1662. https://doi.org/10.1111/jofi.12041

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