Starting from an information process governed by a geometric Brownian motion we show that asset returns are predictable if the elasticity of the pricing kernel is not constant. Declining [Increasing] elasticity of the pricing kernel leads to mean reversion and negatively autocorrelated asset...

This paper investigates the dynamic linkages in terms of the first and second moments between stock and bond returns, within a wide range of advanced economies, over the different phases of the recent financial crisis. The adopted empirical framework is a bivariate volatility model, where...

We operationalize the definition of systemic risk provided by the IMF, BIS, and FSB and derive testable hypotheses to identify indicators of systemic risk. We map these hypotheses into a two-stage hierarchical testing framework, combining insights from the early-warning literature on financial...

Using a unique survey dataset, I study how financial market experts form their stock market expectations. I document a strong disagreement among experts about how important macroeconomic and financial variables are related to stock returns. The results of an analysis of the relationships between...

Using a unique survey dataset, the author studies how financial market experts form their stock market expectations. He documents a strong disagreement among experts about how important macroeconomic and financial variables are related to stock returns. The results of an analysis of the...

This study finds that equity returns in the banking sector in the wake of the Great Recession and the European sovereign debt crisis have been driven mainly by weak growth prospects and heightened sovereign risk and to a lesser extent, by deteriorating funding conditions and investor sentiment....

This paper contributes to the literature on early warning indicators by applying a Bayesian model averaging approach. Our analysis, based on Austrian data, is carried out in two steps: First, we construct a quarterly financial stress index (AFSI) quantifying the level of stress in the Austrian...

We analyze the impact of the announcement of the banking union on stock market returns of euro area banks against the backdrop of three commonly held views of the banking union. We document positive individual abnormal returns for most banks. Abnormal returns are large and positive on average,...