The empirical literature of stock market predictability mainly suffers from model uncertainty and parameter instability. To meet this challenge, we propose a novel approach that combines the documented merits of diffusion indices, regime-switching models, and forecast combination to predict the...

We propose a new approach to model high and low frequency components of equity correlations. Our framework combines a factor asset pricing structure with other specifications capturing dynamic properties of volatilities and covariances between a single common factor and idiosyncratic returns....

We analyze 7.7 million patents via textual analysis to develop a novel patent-to-patent measure of innovation similarity among firms. With this measure, we investigate whether stock price movements reveal information about firms' technological connectedness. We find that investors impound...

We use a Panel Smooth Transition Regression (STR) model to study nonlinearities in the expectationformation process in the US stock market. To this end, we use data from the Livingston survey to investigate how the importance of regressive and extrapolative expectations fluctuates over time as...

We investigate lead-lag relationships among country stock returns and identify a leading role for the United States: lagged U.S. returns significantly predict returns in numerous non-U.S. industrialized countries (after controlling for national economic variables and countries' own lagged...

We present significant evidence of out-of-sample equity premium predictability for a host of industrialized countries over the postwar period. There are important differences, however, in the nature of equity premium predictability between the United States and other developed countries. Taken...

Bayesian inference in a time series model provides exact, out-of-sample predictive distributions that fully and coherently incorporate parameter uncertainty. This study compares and evaluates Bayesian predictive distributions from alternative models, using as an illustration five alternative...