We investigate the relative ability of two measures of the market implied cost of capital to predict aggregate equity market returns. One is Aggregate ICC, which is a weighted average of individual firms' ICC's. The other is ICC calculated using index information (Index ICC). Index ICC predicts...

This paper introduces a new tail risk measure based on the risk-neutral excess expected shortfall of a cross-section of stock returns. We propose a novel way to risk neutralize the returns without relying on option price information. Empirically, we illustrate our methodology by estimating a...

Using both monthly and weekly return series between 1999:01 and 2013:12, we investigate the dynamics of stock returns and volatility in a Kenya's fledgling equity market – the Nairobi Securities Exchange. Both the GARCH-in-mean and E-GARCH models yield positive and significant conditional...

This paper uses the correlation of money flow among mutual funds to forecast the skewness of stock returns. We show that asset returns are highly negatively skewed when their mutual fund owners experience correlated liquidity shocks. In addition, stocks with high mutual fund ownership are more...

This paper investigates the determinants of six different lottery-like stock return definitions that have been analyzed separately in prior literature. While we focus on information uncertainty as captured by accounting information, mispricing, institutional ownership and default risk as main...

We examine the impact of expected inflation on stock returns. We use inflation forecasts from the Focus survey and real returns of Ibovespa (the index of B3, the Brazilian stock exchange). In our main specification, an increase of $ 1 $ percentage point in expected inflation for the next 12...

Recent evidence on the relationship between investor sentiment and subsequent monthly market returns in China shows that investor sentiment is a reliable momentum predictor since an increase (decrease) in investor sentiment leads to higher (lower) future returns. However, we suggest that...

Campbell and Shiller’s “accounting identity” implies that the log dividend-price ratio (LDPR) predicts either returns or dividend growths, but neither is significantly predictable, a well-known puzzle. Existence of the long-term mean LDPR is an important assumption behind the accounting...

Although it is well established that investors are willing to accept a negative premium for lottery-like stocks, it is puzzling that the opposite effect is not observed in stocks experiencing large daily losses. We find that stocks that experience large negative daily returns (MIN) also display...

We develop a new variational Bayes estimation method for large-dimensional sparse vector autoregressive models with exogenous predictors. Unlike existing Markov chain Monte Carlo (MCMC) and variational Bayes (VB) algorithms, our approach is not based on a structural form representation of the...