Download or read book Are Stock Returns Predictable from Industrial Production written by and published by . This book was released on 1998 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Do Industries Lead the Stock Market Gradual Diffusion of Information and Cross Asset Return Predictability written by Walter N. Torous and published by . This book was released on 2009 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test the hypothesis that the gradual diffusion of information across asset markets leads to cross-asset return predictability. Using thirty-four industry portfolios and the broad market index as our test assets, we establish several key results. A number of industries such as retail, services, commercial real estate, metal, and petroleum lead the stock market by up to two months. Importantly, an industry's ability to lead the market is correlated with its propensity to forecast various indicators of economic activity such as industrial production growth. Consistent with our hypothesis, these findings indicate that the market reacts with a delay to information in industry returns about its fundamentals because information diffuses only gradually across asset markets.
Download or read book Asset Pricing written by John H. Cochrane and published by Princeton University Press. This book was released on 2009-04-11 with total page 560 pages. Available in PDF, EPUB and Kindle. Book excerpt: Winner of the prestigious Paul A. Samuelson Award for scholarly writing on lifelong financial security, John Cochrane's Asset Pricing now appears in a revised edition that unifies and brings the science of asset pricing up to date for advanced students and professionals. Cochrane traces the pricing of all assets back to a single idea--price equals expected discounted payoff--that captures the macro-economic risks underlying each security's value. By using a single, stochastic discount factor rather than a separate set of tricks for each asset class, Cochrane builds a unified account of modern asset pricing. He presents applications to stocks, bonds, and options. Each model--consumption based, CAPM, multifactor, term structure, and option pricing--is derived as a different specification of the discounted factor. The discount factor framework also leads to a state-space geometry for mean-variance frontiers and asset pricing models. It puts payoffs in different states of nature on the axes rather than mean and variance of return, leading to a new and conveniently linear geometrical representation of asset pricing ideas. Cochrane approaches empirical work with the Generalized Method of Moments, which studies sample average prices and discounted payoffs to determine whether price does equal expected discounted payoff. He translates between the discount factor, GMM, and state-space language and the beta, mean-variance, and regression language common in empirical work and earlier theory. The book also includes a review of recent empirical work on return predictability, value and other puzzles in the cross section, and equity premium puzzles and their resolution. Written to be a summary for academics and professionals as well as a textbook, this book condenses and advances recent scholarship in financial economics.
Download or read book Predictable Components of Industry Stock Returns written by Lasheng Yuan and published by . This book was released on 1993 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Predictabilty of German Stock Returns written by Judith Klähn and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 137 pages. Available in PDF, EPUB and Kindle. Book excerpt: Judith Klähn proves that some of the most important variables in predicting U.S. equity returns are not significant for the German stock market. She shows that the composition of Germany's investor base plays an important role, and she outlines the variables crucial for the German stock market.
Download or read book Stock Returns and Real Activity written by and published by . This book was released on 1990 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Stock Return Predictability Macro Economic Regressed Sum of the Parts Method written by Prince Ratchatasumrit and published by . This book was released on 2017 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: This research compares and improves stock market return forecasting via the Sum-of-theParts (SOP) method introduced by Ferreira and Santa-Clara (2011) to 3 representative countries from developed, emerging, and frontier market. Our process includes forecasting separately two main decomposed components of the SOP method with macro-economic variables. The two components from SOP method being regressed are growth in price-to-earnings and growth in earnings, while macro-economic variables being used are growth in foreign portfolio investment, log growth in consumer price index, and log growth in industrial production index. The forecasted components are then being sum with dividend-price ratio to forecast one step ahead stock market return. The findings show that macro-economic regressed variables outperform both the historical sample mean approach and original SOP method, with results from out-of-sample R-squared of 7.29% for USA and 5.96% for Vietnam. The results of SOP method, without macro-economic regressed components, do not consistently carry itself up to 2017 data due to correlation issues of forecasted components. The forecasted growth in price-to-earnings multiple in relation to foreign portfolio investment suggested to us that investors in neither of the representative countries suspect foreign investment holdings to have any impact on growth in price-to-earnings multiples. While, investors in United States, unlike Thailand and Vietnam, may have optimistic expectation that growth in inflation, proxied by CPI, indicates growth in price variable in price-to-earnings multiples, encouraging them to purchase equities to prevent loss from devaluation. The forecasted growth in earnings in relation to GDP, proxied by IPI, on the other hand, suggest among investors from United States to bring about the growth in earnings of corporate entities, unlike those from Thailand and Vietnam.
Download or read book Regime Changes in the Relationship between Stock Returns and the Macroeconomy written by Stuart Hyde and published by . This book was released on 2005 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the presence of nonlinear influences in the relationship between stock returns and the macroeconomy is examined for eight countries. The markets chosen are Belgium, Canada, France, Germany, Ireland, Japan, U.K. and the U.S. Specifically we analyse both the contemporaneous (asset pricing) relationship and the lagged (return predictability) relationship. Significantly the asset pricing relationship highlights the importance of accounting for variations in the relationships between bear markets and other states. Nonlinearity is accounted for via regime switching using a smooth transition regression (STR) model with the world market return as the transition variable. There is evidence of nonlinearity in all countries. Given the potentially complex nonlinearities in the determination of stock market prices, the possibility of multiple regimes (MRSTR) is also investigated. With the exception of Belgium, all markets exhibit evidence of multiple regimes. Results show that covariance with the world market portfolio increases during 'crisis' regimes, complementing the findings of Longin and Solnik (2001) and Ang, Chen and Xing (2004). Interest rate and inflation variables are strong determinants of stock returns while dividend yields and oil prices only influence returns in regimes identified by multiple regime models. Industrial production growth is not a significant factor. Out-of-sample forecasting of the nonlinear models is not superior to that of the linear models. However the smooth transition regression models predict direction more frequently than linear specifications. Analysis of return predictability produces results consistent with the standard stylised facts, i.e. that the dividend yield and term structure variables are important predictors of future stock returns.
Download or read book Stock Return Predictability in a Monetary Economy written by Abraham Lioui and published by . This book was released on 2010 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: In an economy where agents hold money, the short interest rate determines the trade-off between money holdings and consumption. Building on this idea, we develop a theoretical model that shows the transmission mechanism through which the short rate finds its way to stock-return predictability regressions.We construct a cointegration relation that links share prices and dividends to the short interest rate when we investigate empirically the main implications of our model. This relationship, that we denote the pdR-ratio, strongly predict stock returns and excess returns, even when the statistical significance of long-horizon return predictability is evaluated using Hodrick (1992) t-statistics. The result that stock returns and excess returns are predictable at long horizons is different from recent findings reported by Ang amp; Bekaert (2006). We differ from Ang amp; Bekaert (2006) by explicitly accounting for the non-stationarity of the predictors in a cointegration framework.Our theoretical model also suggests that aggregate output might be better suited as a scaling variable than dividends. As a consequence, we also build a cointegration variable that relates share prices, output, and the interest rate in a cointegration framework. We denote this variable the pyR-ratio. We show that the pyR-ratio strongly predicts stock returns and excess returns at long horizons. The pyR-ratio is also found to have some predictive power for dividend growth which the pdR-ratio does not. Neither the pyR-ratio nor the pdR-ratio have predictive power for output growth and the interest rate.
Download or read book Labor Income and Predictable Stock Returns written by Tano Santos and published by . This book was released on 2001 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose and test a novel economic mechanism that generates stock return predictability on both the time series and the cross section. In our model, investors' income has two sources, wages and dividends, that grow stochastically over time. As a consequence, the fraction of total income produced by wages changes over time de-pending on economic conditions. We show that as this fraction fluctuates, the risk premium that investors require to hold stocks varies as well. We test the main implications of the model and find substantial support for it. A regression of stock returns on lagged values of the labor income to consumption ratio produces statistically significant coefficients and adjusted R2 's that are larger than those generated when using the dividend price ratio. Tests of the cross sectional implication find considerable improvements on the performance of both the conditional CAPM and CCAPM when compared to their unconditional counterparts
Download or read book What Drives Stock Returns in Japan written by Samuel Xin Liang and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate systematic factors driving stock returns and stock return predictability in Japan. We find that dividend yield, cash-flow yield, and industrial production are systematic pricing factors after controlling for market, value, and size while other macroeconomic factors are not. Value and size premiums become insignificant after adding the industrial production factor to market, value and size factors because the value factor captures the changing fundamentals of Japan's macroeconomic development. For predicting stock returns, our tests using Fama-MacBeth (1973) regressions accept the models of both factor and characteristics for a stock's cash-flow yield, and a characteristics model for a stock's short-term reversal, dividend yield, and earnings yield.
Download or read book Are Industry Returns Predictable written by Kenneth Robert Beller and published by . This book was released on 1996 with total page 420 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Stock Returns and Real Activity written by G. William Schwert and published by . This book was released on 2010 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the relation between real stock returns and real activity from 1889-1988. It replicates Fama's (1990) results for the 1953-87 period using an additional 65 years of data. It also compares two measures of industrial production in the tests: (1) the series produced by Babson for 1889-1918, spliced with the Federal Reserve Board index of industrial production for 1919-1988, and (2) the new Miron and Romer (1989) index spliced with the Fed index in 1941. Fama's findings are robust for a much longer period -- future production growth rates explain a large fraction of the variation in stock returns. The new Miron-Romer measure of industrial production is less closely related to stock price movements than the older Babson and Federal Reserve Board measures.
Download or read book Labor Income and Predictable Stock Returns written by Tano Santos and published by . This book was released on 2011 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose and test a novel economic mechanism that generates stock return predictability on both the time series and the cross section. In our model, investors' income has two sources, wages and dividends, that grow stochastically over time. As a consequence, the fraction of total income produced by wages changes over time depending on economic conditions. We show that as this fraction fluctuates, the risk premium that investors require to hold stocks varies as well.We test the main implications of the model and find substantial support for it. A regression of stock returns on lagged values of the labor income to consumption ratio produces statistically significant coefficients and adjusted R2?s that are larger than those generated when using the dividend price ratio. Tests of the cross sectional implication find considerable improvements on the performance of both the conditional CAPM and CCAPM when compared to their unconditional counterparts.
Download or read book Stock Returns Inflation and the Proxy Hypothesis written by Pierluigi Balduzzi and published by . This book was released on 2008 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reexamines the proxy hypothesis of Fama (American Economic Review, 1981, 71, 545-565) as the main explanation for the negative correlation between stock returns and inflation. We look at quarterly data on industrial-production growth, monetary-base growth, CPI inflation, three-month Treasury-bill rates, and returns on the equally-weighted NYSE portfolio, for the 1954-1976 and 1977-1990 periods. Using time-series techniques, we find that production growth induces only a weak negative correlation between inflation and stock returns, and explains less of the covariance between the two series than inflation and interest-rate innovations.
Download or read book Predictability of UK Stock Returns an Analysis by Industry Group written by Catalina Velasco-Anton and published by . This book was released on 1994 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Economic Links and Cross predictability of Stock Returns written by Sebastian Müller and published by . This book was released on 2017 with total page 83 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior research has shown that information diffuses gradually across stocks that are economically linked at the industry level. I document a similar pattern when stock portfolios are formed based on characteristics that are used in the anomaly literature (e.g., size, value, asset growth). Specifically, characteristics are useful to identify economic links, and earnings surprises contain information about future returns of other firms that share similar characteristics (i.e., “similar-style” firms). Such style-based earnings surprises can be used to predict style returns in the time-series. For the cross-section of stocks, I create a composite style-based earnings surprise measure (SESM), which generates an equal-weighted (value-weighted) long-short strategy return of 167 (101) basis points per month. I do not find that industry spillovers, the traditional post-earnings announcement drift, unconditional abnormal style returns, or risk can explain the return predictability. My findings suggest a further channel of gradual information diffusion in security markets.
