A Global Version of Samuelson’s Dictum
forthcoming at the American Economic Review: Insights
25 Pages Posted: 23 Mar 2021 Last revised: 29 Sep 2021
Date Written: September 16, 2021
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.
Keywords: Samuelson’s Dictum, Sovereign CDS, Efficiency
JEL Classification: G12
Suggested Citation: Suggested Citation