We examine stock return predictability of the South African (SA) market using lagged country monthly returns of the US, the UK, Germany, and Japan during the period from January 1973 to December 2014. Our results show that SA market return and industry returns can be significantly predicted by lagged US market return and industry returns, mainly in the pre-1996 market change period. Lagged German and Japanese returns have no predictive ability, while lagged UK returns only provide some degree of predictive power. However, the weaker return predictability for SA stock market in the post-1996 period could be due to liquidity effects of economic reforms, regulatory changes and an enhanced information environment on the SA market.
This study examines stock return predictability in business cycle fluctuations across 17 developed countries and 26 developing countries over the period from January 1970 to December 2019. We uncover that lagged U.S. returns can be regarded as a reliable predictor only during recessions. The results remain robust after controlling for commonly used return predictors. Our empirical findings carry some implications for the role of leading markets, fundamental uncertainty, change in investors' beliefs and dynamics of stock return volatility in economic downturns.
January returns on stock markets can be used as a barometer for the subsequent 11-month holding period returns as documented by Cooper et al. (2006). We examine this apparent anomaly and analyze the effects of other holding periods of 1, 3, and 6 months in six Central and Eastern European transition economies from January 1991 through December 2013. Our results do not support the presence of the other January effect (OJE) in fi ve of the six markets. Instead, the results reveal signifi cant anomalies in non-January months and that such effects vary across markets. This latter evidence might refl ect different characteristics in these economies, including diverse levels of market effi ciency, local risk factors, and portfolio management among others. Furthermore, we construct a trading rule using the other month effect to illustrate the possibility of developing profi table investment strategies to earn abnormal returns.Keywords: market effi ciency, calendar anomalies, other January effect, other month effect JEL classifi cation index: G14 * We thank, without implicating, Ali F. Darrat and the two anonymous reviewers for many useful comments.
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