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Macro to micro: Country exposures, firm fundamentals, and stock returns


Journal of Accounting and Economics



Authors / Editors

Li N;Richardson S A;Tuna I

Publication Year



We outline a systematic approach to incorporate macroeconomic information into firm level forecasting from the perspective of an equity investor. Using a global sample of 198,315 firm-years over the 1998–2010 time period, we find that combining firm level exposures to countries (via geographic segment data) with forecasts of country level performance, is able to generate superior forecasts for firm fundamentals. This result is particularly evident for purely domestic firms. We further find that this forecasting benefit is associated with future excess stock returns. These relations are stronger after periods of higher dispersion in expected country level performance.


Macroeconomic exposures; Earnings; Stock returns; Geographic segments

Available on ECCH


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