We document the predictive ability and economic significance of global economic policy uncertainty for U.S. equity returns. After orthogonalizing global economic policy uncertainty (global EPU) with respect to the U.S. EPU, we find that it has significant predictive power for aggregate stock...

This paper develops a novel empirical method that uses property level cash flow information to estimate the risk and return characteristics of private commercial real estate. Monte Carlo simulations suggest that this method is more accurate than the conventional index-based approach. Applying...

Introducing extrapolative bias into a standard production-based model with recursive preferences reconciles salient stylized facts about business cycles (low consumption volatility, high investment volatility relative to output) and financial markets (high equity premium, volatile stock returns,...

This study introduces a monthly news-based economic policy uncertainty index for New Zealand (NZ EPU) and examines the pricing implications of our newly constructed NZ EPU on a large sample of institutional investors. We find that NZ EPU is a priced and an undiversifiable risk factor that...

We investigate the role of economic uncertainty in the cross-sectional pricing of individual stocks and equity portfolios. We estimate stock exposure to an economic uncertainty index and show that stocks in the lowest uncertainty beta decile generate 6% more annualized risk-adjusted return...

I develop an analytical general-equilibrium model to explain economic sources of business-cycle pattern of aggregate stock market returns. With concave production functions and capital accumulation, a technology shock has a pro-cyclical direct effect and a counter-cyclical indirect effect on...

We quantify disagreement about the economy with ex-ante measures of divergence of opinion among economic forecasters and investigate if economic disagreement has a significant impact on the cross-sectional pricing of individual stocks. We find a significant disagreement premium of 7.2% per...

This paper suggests a novel approach for predicting aggregate stock returns at quarterly and annual frequencies. Weak return predictability is consistent with the view that a stationary component of stock prices is highly persistent. In such cases, expected returns are time-varying but also...

Aggregate investment and consumption have heterogeneous cyclical implications on firm-level earnings and the cyclical earnings patterns are associated with future abnormal returns. Earnings cyclicalities give rise to an information channel through which anticipated changes in investment and...

The correlation between stock and bond returns is a cornerstone of asset allocation decisions. The correlation can move considerably over time, which can have a large impact on portfolio construction. Our empirical evidence points to inflation and real returns on short-term bonds, and the...