Investment Shocks and Asset Returns: International Evidence

42 Pages Posted: 1 Oct 2016 Last revised: 17 Mar 2019

See all articles by Ruchith Dissanayake

Ruchith Dissanayake

Queensland University of Technology - School of Economics and Finance

Akiko Watanabe

University of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis

Masahiro Watanabe

University of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis

Date Written: March 14, 2019

Abstract

Using a large cross section of stocks from over thirty countries, we examine the implications of investment-specific technological shocks for asset prices and macroeconomic quantities. We find that the negative risk premium associated with the investment shock is stronger and often significant in developed markets with greater access to capital, superior financial institutions, and stronger product market competition. The investment premium is related to, but not subsumed in, the value premium. The results underscore the importance of allocative efficiency in the pricing of technological advances, and help reconcile the conflicting existing evidence from the U.S. market with different sample periods.

Keywords: investment-specific technology shocks, investment-minus-consumption factor, international equity markets, economic development, value premium

JEL Classification: G12

Suggested Citation

Dissanayake, Ruchith and Watanabe, Akiko and Watanabe, Masahiro, Investment Shocks and Asset Returns: International Evidence (March 14, 2019). University of Alberta School of Business Research Paper No. 2016-511; Asian Finance Association (AsianFA) 2018 Conference. Available at SSRN: https://ssrn.com/abstract=2845648 or http://dx.doi.org/10.2139/ssrn.2845648

Ruchith Dissanayake (Contact Author)

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

HOME PAGE: http://www.rdissanayake.com

Akiko Watanabe

University of Alberta - School of Business ( email )

3-30A Business Building
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-0385 (Phone)
780-492-3325 (Fax)

HOME PAGE: http://www.bus.ualberta.ca/awatanabe

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada

HOME PAGE: http://www.bus.ualberta.ca/awatanabe

Masahiro Watanabe

University of Alberta - School of Business ( email )

School of Business - FMS
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-7343 (Phone)
780-492-3325 (Fax)

HOME PAGE: http://www.ualberta.ca/~masa/

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada

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