We examine whether cross-firm return predictability is associated with accounting quality (AQ), and find that stock returns of good AQ firms significantly positively predict one-month-ahead stock returns to industry- and size- matched poor AQ firms. In testing a delayed-information-processing...

An increase in the number of asset pricing models intensifies model uncertainties in assetpricing. While a pure "model selection" (singling out a best model) can result in a loss of usefulinformation, a full “model pooling” may increase the risk of including noisy information.We make a...

According to the dynamic version of the Gordon growth model, the long-run expected return on stocks, stock yield, is the sum of the dividend yield on stocks plus some weighted average of expected future growth rates in dividends. We construct a measure of stock yield as a model-imposed affine...

We investigate the prediction of excess returns and fundamentals by financial ratios – dividend-price ratio, earnings-price ratio, and book-to-market ratio – by decomposing financial ratios into a cyclical component and a stochastic trend component. We find both components predict excess...

The paper examines statistical and economic evidence of out-of-sample bond return predictability for a real-time Bayesian investor who learns about parameters, hidden states, and predictive models over time. We find some statistical evidence using information contained in forward rates. However,...

We explore the relationship between sticky wages and risk. Like operating leverage, sticky wages are a source of risk for the firm. Firms, industries, regions, or times with especially high or rigid wages are especially risky. If wages are sticky, then wage growth should negatively forecast...

We perform a comprehensive examination of the recursive, comparative predictive performance of a number of linear and non-linear models for UK stock and bond returns. We estimate Markov switching, threshold autoregressive (TAR), and smooth transition autoregressive (STR) regime switching models,...

This paper proposes a predictive approach to estimate macroeconomic tail risk dynamics over the long run (1876-2015). Our approach circumvents the scarcity of large macroeconomic crises by using observable predictive variables in a large international panel. This method does not require to use...

We perform a comprehensive examination of the recursive, comparative predictive performance of a number of linear and non-linear models for UK stock and bond returns. We estimate Markov switching, threshold autoregressive (TAR), and smooth transition autoregressive (STR) regime switching models,...