evidence in favor of the ones that allow for the possibility that the economy has experienced recurrent breaks. The recession … probabilities of these models provide a clearer classification of the business cycle into expansion and recession periods, and … superior performance in the ability to correctly call recessions and to avoid false recession signals. Overall, the sensitivity …

negative territory just before business cycle peaks and then strongly recovers as the recession unfolds. Recessions are … well. We show that such model-implied recession probabilities strongly improve equity premium prediction out-of-sample. We …