- مبلغ: ۸۶,۰۰۰ تومان
- مبلغ: ۹۱,۰۰۰ تومان
For 77 technology-investing countries we test whether their stock market returns are predictable. We find that exchange rate returns and U.S. stock excess returns predict stock market returns for most countries in our sample, while crude oil and inflation predict returns of less than 40% of countries. While in out-of-sample tests the evidence of predictability declines, U.S. returns still beat the constant returns model for three-quarters of countries in our sample. A portfolio of all 77 countries offers a mean-variance investor annualized profits of between 5.7% and 8.0%, and profits are maximized when return forecasts are based on U.S. returns.
IV. CONCLUDING REMARKS
This paper builds on earlier literature on stock return predictability at the country level. The main innovation is that we consider 77 countries which are technology-investing in the sense that they have a historical record of patents awarded over the period 1981 to 2014, allowing us to: (a) test whether widely accepted predictors, such as U.S. stock excess returns, exchange rate returns, inflation rate, and oil price returns, predict and forecast country excess returns better than a benchmark constant returns model; and (b) form several country portfolios on the basis of technology development, including portfolios of developed and emerging countries.
Our empirical results unravel several new insights on the technology-investing countries. First, we discover that U.S. stock excess returns is a strong predictor of country stock excess returns, both in in-sample and out-of-sample tests, followed by exchange rate returns. Oil price returns and inflation do predict country stock excess returns, but for at best around 35% of the countries in our sample. Second, a mean-variance investor investing in a portfolio of emerging countries is likely to maximize profits. Moreover, our results suggest that the role of U.S. stock excess returns is not only statistically important (in terms of predictability and forecasting ability) but also when using U.S. returns to form mean-variance profits, on average profits are around 3% per annum higher compared to when using exchange rate returns based models.
The key implication of our empirical analysis is that while technology-investing countries have predictable and, therefore, profitable stock returns, profits are driven by different geographical location of technology-investing countries and by the level of country development. This finding adds to our understanding of asset pricing and the resulting portfolio choice amongst countries that are technology-investing.