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Stock price movements: Evidence from global equity markets

Author

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  • Lan, Chunhua
  • Doan, Bao
Abstract
This paper studies how market-level stock price movements respond to changes in expected future aggregate cashflows versus discount rates in individual global equity markets. We find that market-level dividend yields have strong forecasting power for aggregate dividend growth over a short term in most stock markets but their forecasting power becomes weak with investment horizon; their forecasting power for returns tends to exhibit an opposite pattern. The variance decomposition of dividend yields exhibits interesting cross-country heterogeneity. We further find that dividend smoothing and country-level disclosure and investor protection are two important drivers of the diverse predictability patterns across countries.

Suggested Citation

  • Lan, Chunhua & Doan, Bao, 2022. "Stock price movements: Evidence from global equity markets," Journal of Empirical Finance, Elsevier, vol. 69(C), pages 123-143.
    • Handle: RePEc:eee:empfin:v:69:y:2022:i:c:p:123-143
    DOI: 10.1016/j.jempfin.2022.09.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Stock price movements; Multiperiod dividend growth predictability; Multiperiod return predictability; Dividend smoothing; Disclosure and investor protection;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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