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A Global Version of Samuelson's Dictum

Author

Listed:
  • Yaqing Xiao
  • Hongjun Yan
  • Jinfan Zhang

Abstract

Samuelson'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.

Suggested Citation

  • Yaqing Xiao & Hongjun Yan & Jinfan Zhang, 2022. "A Global Version of Samuelson's Dictum," American Economic Review: Insights, American Economic Association, vol. 4(2), pages 239-254, June.
    • Handle: RePEc:aea:aerins:v:4:y:2022:i:2:p:239-54
    DOI: 10.1257/aeri.20210186
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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