We build an equilibrium model to explain why stock return predictability concentrates in bad times. The key feature is that investors use different forecasting models, and hence assess uncertainty differently. As economic conditions deteriorate, uncertainty rises and investors' opinions...

The paper examines the informational content of a series of macroeconomic indicator variables with the intention to predict stock market downturns - colloquially also referred to as 'bear markets' - for G7 countries. The sample consists of monthly stock market indices and a set of exogenous...