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This paper considers whether the log dividend yield provides forecast power for stock returns. While this is an oft-researched topic there is no consensus answer and yet it remains crucial in our understanding of asset pricing. Using a five-year rolling window we compare forecasts from the...
Persistent link: https://www.econbiz.de/10013012956
framework, our models deliver realistic intraday Value-at-Risk and Expected Shortfall predictions. Compared to the basic CTRW … filtering methods make the CTRW framework a useful tool for intraday risk management (trading), especially at high frequencies …
Persistent link: https://www.econbiz.de/10013079102
In this paper, we propose a simple approach to testing and modelling nonlinear predictability of stock returns using Hermite Functions. The proposed test suggests that there exists a kind of nonlinear predictability for the dividend yield. Furthermore, the out-of-sample evaluation results...
Persistent link: https://www.econbiz.de/10012945869
Motivated by the present-value framework, this article proposes a novel and flexible semiparametric time-varying model to examine the so-called `pockets of predictability,' i.e., stock returns or cash flows are significantly predictable in a given local period. We apply a semiparametric profile...
Persistent link: https://www.econbiz.de/10014257232
We survey the literature on stock return forecasting, highlighting the challenges faced by forecasters as well as strategies for improving return forecasts. We focus on U.S. equity premium forecastability and illustrate key issues via an empirical application based on updated data. Some studies...
Persistent link: https://www.econbiz.de/10014351279
We present significant evidence of out-of-sample equity premium predictability for a host of industrialized countries over the postwar period. There are important differences, however, in the nature of equity premium predictability between the United States and other developed countries. Taken...
Persistent link: https://www.econbiz.de/10013146627
Over the last two decades, alternative expected return proxies have been proposed with substantially lower variation than realized returns. This helped to reduce parameter uncertainty and to identify many seemingly robust relations between expected returns and variables of interest, which would...
Persistent link: https://www.econbiz.de/10013061894
We examine the effects of estimation risk and Bayesian learning on equilibrium asset prices when there is uncertainty … generates a sizable average annual equity premium, relatively low average risk-free rate and a high mean Sharpe ratio that … approximates the data average with (1) low risk aversion, (2) non-persistent (i.i.d.) growth rates, (3) power utility, (4) diffuse …
Persistent link: https://www.econbiz.de/10013130393
The relationship between risk and return is one of the most studied topics in finance. The majority of the literature …
Persistent link: https://www.econbiz.de/10013026110
forecasts along both statistical and economical measures of performance. Moreover, we find that firms whose equity risk premium … that "breaks'' is a risk factor that is priced in the cross-section. Finally, we find that the majority of breaks in equity …
Persistent link: https://www.econbiz.de/10012912075