We show that a business-cycle component of consumption growth (dubbed business-cycle consumption) with cycles between 2 and 4 years is effective in explaining the differences in risk premia across alternative test assets, including recently-proposed anomaly portfolios. We formalize the mapping...

Using U.S. data from 1926 to 2015, I show that financial skewness?a measure comparing cross-sectional upside and downside risks of the distribution of stock market returns of financial firms?is a powerful predictor of business cycle fluctuations. I then show that shocks to financial skewness are...

Based on monthly data covering the period from 1987 to 2019, we analyse whether cross-sectional moments of stock market returns may provide information about the future position of the German business cycle. We apply in-sample forecasting regressions with and without leading indicators as...

We document the empirical fact that asset prices in the consumption-goods and investment-goods sector behave almost identically in the US economy. In order to derive the cyclical behavior of the equity returns in these two sectors, we consider a standard two-sector real-business cycle model with...

This is the first paper in the DSGE literature to match key business cycle moments and long-run equity returns in a small open economy with production. These results are achieved by introducing four modifications to a standard real business cycle model: (1) borrowing and lending costs are...

Predictions of asset returns and volatilities are heavily discussed and analyzed in the finance research literature. In this paper, we compare linear and nonlinear predictions for stock- and bond index returns and their covariance matrix. We show in-sample and out-of-sample prediction accuracy...

Several academics have studied the ability of hybrid models mixing univariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models and neural networks to deliver better volatility predictions than purely econometric models. Despite presenting very promising results, the...

Output and asset returns are highly positively correlated across the U.S. and the remaining major industrialized countries. Standard business cycle models that assume flexible prices and wages, in the Real Business Cycle (RBC) tradition, have great difficulties explaining this fact. This paper...