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International Equity Flows and the Predictability of U.S. Stock Returns

Hartmann, Daniel and Pierdzioch, Christian (2006): International Equity Flows and the Predictability of U.S. Stock Returns.

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Abstract

We examined the link between international equity flows and U.S. stock returns. Based on the results of tests of in-sample and out-of-sample predictability of stock returns, we found evidence of a strong positive (negative) link between international equity flows and contemporaneous (one-month-ahead) stock returns. Our results also indicate that an investor, in real time, could have used information on the link between international equity flows and one-month-ahead stock returns to improve the performance of simple trading rules.

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