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We build an equilibrium model to explain why stock return predictability concentrates in bad times. The key feature is that investors use different forecasting models, and hence assess uncertainty differently. As economic conditions deteriorate, uncertainty rises and investors' opinions...
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This paper compares alternative estimation procedures for multi-level factor models which imply blocks of zero …
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direct forecasts when estimation error is a first-order concern, i.e. in small samples and for long forecast horizons …
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