We revisit the risk-return relation using the component GARCH model and international daily MSCI stock market data. In contrast with the previous evidence obtained from weekly and monthly data, daily data show that the relation is positive in almost all markets and often statistically...

This paper revisits the time-series relation between the conditional risk premium and variance of the equity market portfolio. The main innovation is that we construct a measure of the ex ante equity market risk premium using corporate bond yield spread data. This measure is forward-looking and...

This paper examines the association between monetary policy and stock market booms and busts in the United States, United Kingdom, and Germany during the 20th century. Booms tended to arise when output growth was rapid and inflation was low, and end within a few months of an increase in...

Much recent academic attention has focused on the relative ability of markets and bank supervisors to assess the risk of depository institutions. We add to that literature by comparing the factors influencing bank holding company risk, as gauged by equity markets, with the factors influencing...

We use multivariate regime switching vector autoregressive models to characterize the time-varying linkages among short-term interest rates (monetary policy) and stock returns in the Irish, the US and UK markets. We find that two regimes, characterized as bear and bull states, are required to...

In this paper, we use macrovariables advocated by recent authors to make out-of-sample forecast for returns on individual stocks and then sort stocks equally into ten portfolios on this proxy of conditionally expected returns. The average returns increase monotonically from the first decile...

Over the period 1927:Q1 to 2005:Q4, the average CAPM-based idiosyncratic variance (IV) and stock market variance jointly forecast stock market returns. This result holds up quite well in a number of robustness checks, and we show that the predictive power of the average IV might come from its...

The paper analyzes average idiosyncratic volatility in G7 countries. We find that idiosyncratic volatility is highly correlated across countries and there is a significant Granger causality from the U.S. to the other countries and vice versa. Consistent with U.S. data, when combined with stock...

This paper studies the effects of conflict onset on asset markets applying the event study methodology. We consider a sample of 112 conflicts during the period 1974-2004 and find that a sizeable fraction of them had a significant impact on stock market indices and on major commodity prices....

Guo and Savickas [2005] show that aggregate stock market volatility and average idiosyncratic stock volatility jointly forecast stock returns. In this paper, we quantify the economic significance of their results from the perspective of a portfolio manager. That is, we evaluate the performance,...