We examine the asymmetric impact of shocks to macroeconomic expectations and their underlying dispersion on equity risk premia across different market regimes. First, we rely on a two-state logit mixture vector autoregressive model and use Consensus Economics survey data on GDP growth,...

We examine the asymmetric impact of shocks to macroeconomic expectations and their underlying dispersion on equity risk premia across different market regimes. First, we rely on a two-state logit mixture vector autoregressive model and use Consensus Economics survey data on GDP growth,...

I provide evidence that risks in macroeconomic fundamentals contain valuable information about bond risk premia. I extract factors from a set of quantile-based risk measures estimated for US macroeconomic variables and document that they account for up to 31% of the variation in excess bond...

This paper builds an empirical model to connect option-implied cumulants with expected risk premia through latent risk factors. Expected risk premia on individual stocks are estimated by applying a new partial least squares-based method on risk-neutral cumulants at different orders and various...

This paper studies the predictability of bond risk premia by means of expectations to future business conditions using survey forecasts from the Survey of Professional Forecasters. We show that expected business conditions consistently affect excess bond returns and that the inclusion of...

While investors demand a premium to hold stocks with high illiquidity level and risk, they underreact to stock-level liquidity shocks and idiosyncratic liquidity. Built on Baker and Stein (2004) market liquidity model, this paper: (i) reports a significant relationship between market liquidity...

Estimating long-term expected returns as accurately as possible is of critical importance. Researchers typically base their estimates on yield and growth, valuation, or a combined yield, growth, and valuation framework. We run a horse race of the abilities of different frameworks and input...

The predictability of the equity risk premium is a central and controversial issue in finance. The Risk Premium Factor model is a recent and novel approach to forecasting the equity risk premium and the equity market's level and P/E. This article aims to overcome the main limitation of, and...

We provide strong evidence that the dispersion of individual stock options trading volume across moneynesses (IDISP) contains valuable information about future stock returns. Stocks with high IDISP consistently underperform those with low IDISP by more than 1% per month. In line with the idea...

This paper empirically estimates a heterogeneous agents model using S&P 500 data. While previous studies on heterogeneous agents models typically resort to simulation techniques, our empirical results indicate that the market is populated with fundamentalists, chartists, and noise traders. In...