American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
A Global Version of Samuelson's Dictum
American Economic Review: Insights
vol. 4,
no. 2, June 2022
(pp. 239–54)
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.Citation
Xiao, Yaqing, Hongjun Yan, and Jinfan Zhang. 2022. "A Global Version of Samuelson's Dictum." American Economic Review: Insights, 4 (2): 239–54. DOI: 10.1257/aeri.20210186Additional Materials
JEL Classification
- G12 Equities; Fixed Income Securities
- G14 Information and Market Efficiency; Event Studies; Insider Trading
- G17 Financial Forecasting and Simulation