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Answering the Critics : Yes, ARCH Models Do Provide Good Volatility Forecasts

Andersen, Torben G. - 1997

Volatility permeates modern financial theories and decision making processes. As such, accurate measures and good forecasts of future volatility are critical for the implementation and evaluation of asset pricing theories. In response to this, a voluminous literature has emerged for modeling the...

Persistent link: https://www.econbiz.de/10012472795

Labor Income and Predictable Stock Returns

Santos, Tano - 2001

We propose and test a novel economic mechanism that generates stock return predictability on both the time series and the cross section. In our model, investors' income has two sources, wages and dividends, that grow stochastically over time. As a consequence, the fraction of total income...

Persistent link: https://www.econbiz.de/10012470415

Robust Bond Risk Premia

Bauer, Michael D. - 2017

A consensus has recently emerged that variables beyond the level, slope, and curvature of the yield curve can help predict bond returns. This paper shows that the statistical tests underlying this evidence are subject to serious small-sample distortions. We propose more robust tests, including a...

Persistent link: https://www.econbiz.de/10012455201

Democracy, Redistribution and Inequality

Acemoglu, Daron; Robinson, James A.; Restrepo, Pascual; … - 2013

In this paper we revisit the relationship between democracy, redistribution and inequality. We first explain the … theoretical reasons why democracy is expected to increase redistribution and reduce inequality, and why this expectation may fail … such activities, thus exacerbating inequality among a large part of the population. We then survey the existing empirical …

Persistent link: https://www.econbiz.de/10012458917

Robust-H-infinity Forecasting and Asset Pricing Anomalies

Tornell, Aaron - 2000

We present an alternative expectation formation mechanism that helps rationalize well known asset pricing anomalies, such as the predictability of excess returns, excess volatility, and the equity-premium puzzle. As with rational expectations (RE), the expectation formation mechanism we consider...

Persistent link: https://www.econbiz.de/10012470997

Predicting the Equity Premium Out of Sample : Can Anything Beat the Historical Average?

Campbell, John Y. - 2005

A number of variables are correlated with subsequent returns on the aggregate US stock market in the 20th Century. Some of these variables are stock market valuation ratios, others reflect patterns in corporate finance or the levels of short- and long-term interest rates. Amit Goyal and Ivo...

Persistent link: https://www.econbiz.de/10012467212

Predicting the Equity Premium With Dividend Ratios

Goyal, Amit - 2002

Our paper reexamines the forecasting regressions which predict annual aggregate stock market returns net of the risk-free rate with lagged aggregate dividend-yield ratios and dividend-price ratios. Prior to 1990, the conditional dividend yield could reliably outperform the historical equity...

Persistent link: https://www.econbiz.de/10012469927

The VIX, the Variance Premium and Stock Market Volatility

Bekaert, Geert - 2013

We decompose the squared VIX index, derived from US S&P500 options prices, into the conditional variance of stock returns and the equity variance premium. The latter is increasing in risk aversion in a wide variety of economic settings. We tackle several measurement issues assessing a plethora...

Persistent link: https://www.econbiz.de/10012459667

Does Risk Explain Anomalies? Evidence from Expected Return Estimates

Wu, Jin Ginger - 2010

We construct accounting-based costs of equity for dollar neutral long-short trading strategies formed on a comprehensive list of anomaly variables. These variables include book-to-market, size, composite issuance, net stock issues, abnormal investment, asset growth, investment-to-assets,...

Persistent link: https://www.econbiz.de/10012462701

Stock Returns and Expected Business Conditions : Half a Century of Direct Evidence

Campbell, Sean D. - 2005

We explore the macro/finance interface in the context of equity markets. In particular, using half a century of Livingston expected business conditions data we characterize directly the impact of expected business conditions on expected excess stock returns. Expected business conditions...

Persistent link: https://www.econbiz.de/10012466936

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