This study predicts stock market volatility and applies them to the standard problem in finance, namely, asset allocation. Based on machine learning and model averaging approaches, we integrate the drivers’ predictive information to forecast market volatilities. Using various evaluation...

This study examines the predictive ability of various risk aversion indicators for future real economic activity (REA). Theoretically, the consumption capital asset pricing model and real business cycle model framework explain the role of the investor’s risk aversion. However, we show that...