This study examines evidence of structural breaks in models of predictable components in stock returns related to state variables such as the lagged dividend yield, Treasury bill rate, term spread and default premium. We examine a large set of size-and-industry-sorted profolios of US stocks as...

We develop a common factor approach to reconstruct new business cycle indices for Argentina, Brazil, Chile, and Mexico ("LAC-4") from a new dataset spanning 135 years. We establish the robustness of our indices through extensive testing and use them to explore business cycle properties in...

Regime switching models can match the tendency of financial markets to often change their behavior abruptly and the phenomenon that the new behavior of financial variables often persists for several periods after such a change. While the regimes captured by regime switching models are identified...

In this paper, we explore the potential gains from alternative combinations of the surveyed forecasts in the ECB Survey of Professional Forecasters. Our analysis encompasses a variety of methods including statistical combinations based on principal components analysis and trimmed means,...

This paper studies the asymmetric behavior of negative and positive values of analysts' earnings revisions and links it to the conservatism principle of accounting. Using a new three-state mixture of lognormal models that accounts for differences in the magnitude and persistence of positive,...

Despite the significant growth in the European fund industry in recent years, the performance of European equity mutual funds is a largely unexplored area of research. This paper shows that macroeconomic state variables can be used to identify a significant time-varying alpha component among a...

Key sources of disagreement among economic forecasters are identified by using data on cross-sectional dispersion in forecasters' long- and short-run predictions of macroeconomic variables. Dispersion among forecasters is highest at long horizons where private information is of limited value and...

Many theories in finance imply monotonic patterns in expected returns and other financial variables. The liquidity preference hypothesis predicts higher expected returns for bonds with longer times to maturity; the Capital Asset Pricing Model (CAPM) implies higher expected returns for stocks...

We consider performance measurement and evaluation for managed funds. Similarities and differences−both in econometric practice and in interpretation of outcomes of empirical tests−between performance measurement and conventional asset pricing models are analyzed. We also discuss how...

We propose a new approach to imposing economic constraints on time series forecasts of the equity premium. Economic constraints are used to modify the posterior distribution of the parameters of the predictive return regression in a way that better allows the model to learn from the data. We...