The current account and stock returns

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

In this paper, I use stock return data to test an intertemporal model of the current account. I find that the model performs well in three countries: the U.K., Canada, and Japan. Hall [Hall, R.E., 1978. Stochastic implication of the life cycle-permanent income hypothesis: theory and evidence. J. Polit. Econ. 86 (6), 971-987] points out that because stock price predicts the future state of the economy, it predicts consumption. Assuming that consumption depends on permanent income, my empirical finding indicates that a representative agent smoothes consumption based on stock market information. In other words, stock market returns yield information about permanent income.

Original languageEnglish
Pages (from-to)302-321
Number of pages20
JournalResearch in International Business and Finance
Volume23
Issue number3
DOIs
Publication statusPublished - 2009 Sep
Externally publishedYes

Fingerprint

Current account
Stock returns
Permanent income
Stock market returns
Representative agent
Stock market
Market information
Life cycle
Intertemporal models
Japan
Permanent income hypothesis
Canada
Stock prices

Keywords

  • Current account
  • Permanent income
  • Stock return

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Finance

Cite this

The current account and stock returns. / Kitamura, Yoshihiro.

In: Research in International Business and Finance, Vol. 23, No. 3, 09.2009, p. 302-321.

Research output: Contribution to journalArticle

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