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

See all articles by Yaqing Xiao

Yaqing Xiao

Capital University of Economics and Business

Hongjun Yan

DePaul University

Jinfan Zhang

Chinese University of Hong Kong (Shenzhen)

Date Written: September 16, 2021

Abstract

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

Xiao, Yaqing and Yan, Hongjun and Zhang, Jinfan, A Global Version of Samuelson’s Dictum (September 16, 2021). forthcoming at the American Economic Review: Insights, Available at SSRN: https://ssrn.com/abstract=3810241 or http://dx.doi.org/10.2139/ssrn.3810241

Yaqing Xiao

Capital University of Economics and Business ( email )

Beijing
China

Hongjun Yan (Contact Author)

DePaul University ( email )

1 East Jackson Blvd.
Chicago, IL 60604
United States

HOME PAGE: http://sites.google.com/site/hongjunyanhomepage/

Jinfan Zhang

Chinese University of Hong Kong (Shenzhen) ( email )

Shenzhen
China

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