We study the economic sources of stock-bond return comovement and its time variation using a dynamic factor model. We identify the economic factors employing structural and non-structural vector autoregressive models for economic state variables such as interest rates, (expected) inflation,...

This article contributes to the literature on macroeconomic announcements and their impact on asset prices by investigating how the 15-second Xetra DAX returns reflect the monthly announcements of the two best known business cycle forecasts for Germany, i.e. the ifo Business Climate Index and...

We study the economic sources of stock-bond return comovement and its time variation using a dynamic factor model. We identify the economic factors employing structural and non-structural vector autoregressive models for economic state variables such as interest rates, (expected) inflation,...

Optimal investment of firms implies that expected stock returns are tied with the expected marginal benefit of investment divided by the marginal cost of investment. Winners have higher expected growth and expected marginal productivity (two major components of the marginal benefit of...

We offer an investment-based interpretation of price and earnings momentum. The neoclassical theory of investment implies that expected stock returns are tied with the expected marginal benefit of investment divided by the marginal cost of investment. Winners have higher expected growth and...

This paper examines whether the aggregate investments in corporate equity in the U.S. yield lowering per-unit return for the period 1950-2009. We measure the per-unit return on aggregate equity investment as the ratio of the annual aggregate value of after-tax corporate profit of nonfinancial...

This paper exploits information contained in cross-sectional PEG ratios to extract estimates of the market's expectations for aggregate returns and economic fundamentals. By combining the loglinear present-valuation model and the Capital Asset Pricing Model (CAPM) logic, we establish a theoretic...

We propose a theory of asset prices that emphasizes heterogeneous information as the main element determining prices of different securities. Our main analytical innovation is in formulating a model of noisy information aggregation through asset prices, which is parsimonious and tractable, yet...

This paper finds significant evidence that commodity price changes can predict industry-level returns for horizons between one trading day and up to six trading weeks (30 days). We find that for the 1985-2010 period, 40 out of 49 U.S. industries can be predicted by at least one commodity. Our...

In this paper, we construct the three-factor model introduced by Chen et al. (2010) for a European sample covering 10 countries from the European Monetary Union and the period from 1990 to 2006. Two key findings result. First, we show that the properties of the European factors are comparable to...