Financial Markets and International Risk Sharing



______________T able 2: Cyclicality of capital gains on domestic stock market______________

Dependent Variable

____________Domestic Currency__________

_______________US Dollar__________________

(1)

(2)

(3)

(4)

Real rate of

Deviation of rate

Real rate of

Deviation of rate

capital gains on

of capital gains on

capital gains on

of capital gains on

domestic

domestic stock market

domestic

domestic stock market

stock market

from global stock market

stock market

from global stock market

Australia

5.28

2.13

4.85

1.37

(1.74)***

(2.60)

(1.99)**

(2.65)

Austria

-1.24

-7.09

-0.85

-8.43

(2.41)

(5.28)

(2.84)

(6.67)

Canada

1.71

0.44

1.34

-0.43

(1.00)*

(1.51)

(1.19)

(1.36)

Denmark

0.65

-3.23

1.71

-3.05

(2.87)

(1.90)*

(2.23)

(1.92)*

Finland

3.59

5.61

4.41

5.09

(2.35)

(2.34)**

(2.04)**

(2.32)**

France

4.97

-2.44

5.21

-1.99

(3.65)

(2.88)

(3.89)

(2.79)

Germany

3.08

-0.26

1.18

-0.23

(5.00)

(1.91)

(2.53)

(1.97)

Greece

0.65

0.51

2.68

0.69

(7.02)

(8.04)

(7.41)

(8.01)

Italy

1.88

-1.38

1.73

-0.79

(2.70)

(2.24)

(2.79)

(2.14)

Ireland

-2.14

-1.59

0.20

-0.23

(1.24)

(1.46)

(1.91)

(1.55)

Japan

2.31

-0.57

2.13

-0.68

(1.79)

(1.89)

(2.23)

(1.84)

Netherlands

3.69

1.68

3.75

1.91

(1.96)*

(1.36)

(1.66)**

(1.28)

New

0.92

3.25

3.64

3.52

Zealand

(1.63)

(1.50)**

(2.36)

(1.47)**

Norway

4.26

-1.03

2.86

-1.09

(3.62)

(2.27)

(3.40)

(2.07)

Portugal

0.09

-0.31

1.28

-0.56

(0.07)

(1.82)

(2.05)

(1.84)

Spain

-0.39

1.51

1.10

1.79

(3.95)

(2.79)

(3.57)

(2.54)

Sweden

5.05

3.09

6.34

2.89

(2.43)***

(1.65)*

(1.76)***

(1.63)**

Switzerland

1.65

-1.79

1.22

-1.37

(2.09)

(1.73)

(2.24)

(1.79)

UK

-0.44

-3.71

0.28

-3.90

(2.57)

(0.80)***

(2.65)

(0.75)***

US

2.51

-1.83

2.51

-1.83

(1.45)*

(0.59)***

(1.45)*

(0.59)***

Notes:

The explanatory variables are the real GDP growth rate ((1) and (3)) and the deviation of the real domestic GDP
growth rate from global GDP growth ((2) and (4)), respectively. See text for definitions of all variables. Estimation
by generalised least squares with AR(1) correlated disturbances and semi-robust standard errors (in parentheses).
Time period: 1973-2006. Data availability varies by country. ***, **, * denote significance at the 1, 5 and 10 percent
levels respectively. Full regression outputs are available upon request.

14



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