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Macroeconomic factors and international industry returns

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  • Manolis Kavussanos
  • Stelios Marcoulis
  • Angelos Arkoulis

Abstract

The aim of this article is to examine the global sources of risk in 38 international industries for the period 1987:3-1997:10. Past studies on industry returns and risk have been performed at a national level. However, given the global integration of various industry sectors, it would be interesting to examine the importance of international industry stock returns at the global level. The investment implications of this article, therefore, are that investors could make capital gains by timing their investments, and/or adjust the degree of their portfolio diversification, not only across industries domestically or across countries, internationally but also across global industries. A unique database compiled by Morgan Stanley Capital International on 38 international industries is used. The return on the world equity market portfolio and innovations in the following pre-specified set of global macro variables are employed in the analysis: (i) industrial production, (ii) inflation, (iii) oil prices, (iv) fluctuations in exchange rates against the US dollar, and (v) a measure of credit risk. The most important finding of this paper is that the long run impacts of macroeconomic news have different effects in different industries.

Suggested Citation

  • Manolis Kavussanos & Stelios Marcoulis & Angelos Arkoulis, 2002. "Macroeconomic factors and international industry returns," Applied Financial Economics, Taylor & Francis Journals, vol. 12(12), pages 923-931.
    • Handle: RePEc:taf:apfiec:v:12:y:2002:i:12:p:923-931
    DOI: 10.1080/09603100110069374
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    Cited by:

    1. Carlos Castro & Nini Johana Marin, 2014. "Stock return comovements and integration within the Latin American integrated market," Documentos de Trabajo 11082, Universidad del Rosario.
    2. Cowan, Adrian M. & Joutz, Frederick L., 2006. "An unobserved component model of asset pricing across financial markets," International Review of Financial Analysis, Elsevier, vol. 15(1), pages 86-107.
    3. Rodolfo Aquino, 2006. "A variance equality test of the ICAPM on Philippine stocks: post-Asian financial crisis period," Applied Economics, Taylor & Francis Journals, vol. 38(3), pages 353-362.
    4. Hofmann, Erik & Solakivi, Tomi & Töyli, Juuso & Zinn, Martin, 2018. "Oil price shocks and the financial performance patterns of logistics service providers," Energy Economics, Elsevier, vol. 72(C), pages 290-306.
    5. Geoffrey Loudon & Alan Rai, 2007. "Is volatility risk priced after all? Some disconfirming evidence," Applied Financial Economics, Taylor & Francis Journals, vol. 17(5), pages 357-368.
    6. Carlos Castro, 2010. "Portfolio choice under local industry and country factors," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 24(4), pages 353-393, December.
    7. Kavussanos, Manolis G. & Marcoulis, Stelios N., 2004. "4. Cross-Industry Comparisons Of The Behaviour Of Stock Returns In Shipping, Transportation And Other Industries," Research in Transportation Economics, Elsevier, vol. 12(1), pages 107-142, January.

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