Faculty Scholarship 1994 - Present

Do Sector Returns Lead the Stock Market? The International Evidence

This paper investigates the lead/lag relationship between the returns of a country�s stock market index and 10 primary sector index returns. The sample consists of the Group of Seven (G-7) industrialized countries from January 1974 through December 2003. This study documents a statistically significant lead/lag relationship between sector returns and the stock market index returns in all seven countries. No sector is consistently significant across countries. The results of this study support the gradual information diffusion hypothesis: information travels slowly between asset classes.