Abstract

http://ssrn.com/abstract=2017091
 
 

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Macro to Micro: Country Exposures, Firm Fundamentals and Stock Returns


Ningzhong Li


University of Texas at Dallas

Scott A. Richardson


London Business School

A. Irem Tuna


London Business School

March 18, 2014

AFA 2013 San Diego Meetings Paper

Abstract:     
We outline a systematic approach to incorporate macroeconomic information into firm level forecasting from the perspective of an equity investor. Using a global sample of 198,315 firm-years over the 1998-2010 time period, we find that combining firm level exposures to countries (via geographic segment data) with forecasts of country level performance, is able to generate superior forecasts for firm fundamentals, even after controlling for sell-side analyst forecasts. We further find that this forecasting benefit is associated with future excess stock returns. These relations are stronger after periods of higher dispersion in expected country level performance, and are attributable to both home country and foreign country exposures.

Number of Pages in PDF File: 57

Keywords: macroeconomic exposures, earnings, stock returns, geographic segments, Consensus Economics

JEL Classification: G12, G14, M41

working papers series


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Date posted: March 7, 2012 ; Last revised: March 19, 2014

Suggested Citation

Li, Ningzhong and Richardson, Scott A. and Tuna, A. Irem, Macro to Micro: Country Exposures, Firm Fundamentals and Stock Returns (March 18, 2014). AFA 2013 San Diego Meetings Paper. Available at SSRN: http://ssrn.com/abstract=2017091 or http://dx.doi.org/10.2139/ssrn.2017091

Contact Information

Ningzhong Li
University of Texas at Dallas ( email )
2601 North Floyd Road
Richardson, TX 75083
United States
Scott Anthony Richardson (Contact Author)
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
Ayse Irem Tuna
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
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