We examine the forecasting power of the volatility of the slope of the US-Treasury yield curve on US stock-market volatility. Consistent with theoretical asset pricing models, we find that the volatility of the slope of the term structure of interest rates has significant forecasting power on...

This paper examines return predictability when the investor is uncertain about the right state variables. A novel feature of the model averaging approach used in this paper is to account for finite-sample bias of the coefficients in the predictive regressions. Drawing on an extensive...