This paper examines the out‐of‐sample forecast performance of sectoral stock market indicators for real GDP, private consumption and investment growth up to 4 quarters ahead in the US and the Euro Area. Our findings are that the predictive content of sectoral stock market indicators: i) is...

We examine the joint predictability of return and cash flow within a present value framework, by imposing the implications from a long-run risk model incorporating both time varying volatility and volatility uncertainty. We provide new evidence that the expected return variation and the variance...

Using data for forty markets, this paper examines the nature and possible causes of time-variation within the stock return-dividend yield predictive regression. The results in this paper show that there is significant time-variation in the predictive equation for returns and that such variation...

We study whether option-implied conditional expectation of market loss due to tail events, or tail loss measure, contains information about future returns, especially the negative ones. Our tail loss measure predicts future market returns, magnitude, and probability of the market crashes, beyond...

This paper provides a comprehensive analysis on the stock return predictability in Turkey, January 1997 to July 2011, by employing both portfolio method and cross-sectional regressions. In the risk-related predictors, we found predictive power of beta, total volatility, and idiosyncratic...

Recent empirical evidence suggests that the variance risk premium predicts aggregate stock market returns. We demonstrate that statistical finite sample biases cannot “explain” this apparent predictability. Further corroborating the existing evidence of the U.S., we show that country...

I examine the ability of equity market illiquidity to predict Australian macroeconomic variables, between 1976 and 2010. In contrast to existing, U.S.-based, studies, I find that stock market illiquidity does not, on average, have much predictive power over economic growth. Consistent with the...

In this paper we examine the pricing of volatility risk using SPX corridor implied volatility. We decompose model-free total implied volatility into various components using different segments of the cross section of out-of-the money put and call option prices. We find that only model-free...

This paper presents evidence that the foreign exchange appreciation is predictable by the currency variance risk premium at a medium 6-month horizon and by the stock variance risk premium at a short 1-month horizon. Although currency variance risk premiums are highly correlated with each other...

In contrast to previous studies, we redefine the category of "rationality" from the perspective of investors' pursuit for wealth maximization. Using the data from Chinese stock market, this paper studies the impact of rational and irrational sentiment on asset returns from short-term to...