Stock returns and macro risks: Evidence from Finland

Nader Shahzad Virk

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)


Deviations from the CAPM have generally been observed for the stock markets. One of many alternative approaches is using macro variables as systematic risks. We tested with a number of macro risks for the explanation of Finnish industry returns for a period from 1993:03 until 2008:07. The evidence suggests macro risks explain larger cross-sectional variations in average industry returns than the market factor alone and same is reported with the Hansen and Jagannathan (1997) specification measure. The changes in expected returns with a positive shock in the exchange rate risk and unanticipated inflation remain economically persistent for the post euro period, arguably a sign for the regulatory impact of the coordinated policies from European central bank (ECB). The robustness checks show the prevalence of macro risks, and market risk cannot be ignored altogether.

Original languageEnglish
Pages (from-to)47-66
Number of pages20
JournalResearch in International Business and Finance
Issue number1
Early online date23 Jun 2011
Publication statusPublished - 1 Jan 2012
Externally publishedYes


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