European business cycles and stock return predictability |
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| Affiliation: | 1. Central University of Finance and Economics, China;2. Zhejiang University, China;1. Turkish Industry and Business Association, Mesrutiyet Cad. No: 46 Tepebasi, Istanbul, Turkey;2. Bilkent University, Bilkent Üniversitesi, Ankara, Turkey;1. Department of Economics, University of Pretoria, Pretoria, 0002, South Africa;2. Lebow College of Business, Drexel University, United States;3. IPAG Lab, IPAG Business School, France;1. Russian Science Academy, Ural Branch, Institute of Philosophy and Law, 16 Kovalevskaya Str., Yekaterinburg 620990, Russia;2. Ernst & Young LLC, Sadovnicheskaya Str. 82, Building 2, Moscow 115035, Russia;1. School of Finance and China Financial Policy Research Center, Renmin University of China, Beijing 100872, China;2. College of Economics and Academy of Financial Research, Zhejiang University, Hangzhou 310027, China;3. College of Economics, Zhejiang University, Hangzhou 310027, China |
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| Abstract: | ![]()
This paper finds that the European leading economic indicator, a prime business cycle indicator for the European economies published by the OECD, can strongly predict European stock returns and generate utility gains. Importantly, the predictive power of the European indicator is above and beyond that contained in the country-specific leading indicator. Furthermore, we find that the predictive power of the European indicator is stable. |
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| Keywords: | Stock returns Economic value European business cycles Return predictability |
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