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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...
Persistent link: https://www.econbiz.de/10008684962
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...
Persistent link: https://www.econbiz.de/10008864338
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...
Persistent link: https://www.econbiz.de/10008872325
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...
Persistent link: https://www.econbiz.de/10011071474
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...
Persistent link: https://www.econbiz.de/10011076288
Persistent link: https://www.econbiz.de/10005229658
Persistent link: https://www.econbiz.de/10005229674
Rational expectations are frequently justified as the point of convergence of agents' learning process. When agents' learning feeds back on the actual law of motion of the economy convergence of their rule to a rational expectations equilibrium (REE) is not guaranteed however. Applying new...
Persistent link: https://www.econbiz.de/10005232328
This paper presents evidence of persistent `bull' and `bear' regimes in UK stock returns and considers their economic implications from the perspective of an investor's portfolio decisions. We find that the perceived state probability has a large effect on the optimal allocation to stocks,...
Persistent link: https://www.econbiz.de/10005232511
Disagreement in inflation expectations observed from survey data varies systematically over time in a way that reflects the level and variance of current inflation. This paper offers a simple explanation for these facts based on asymmetries in the forecasters’ costs of over- and...
Persistent link: https://www.econbiz.de/10005114129