Predicting returns on asset markets of a small, open economy and the influence of global risks

David Haab and Thomas Nitschka

No 2017-14, Working Papers from Swiss National Bank

Abstract: Stylized facts of asset return predictability are mainly based on evidence from the US, a large, closed economy, and, hence, are not necessarily representative of small, open economies. Furthermore, discountrate news mainly drive US asset returns. This is not the case in other economies. We use Switzerland as example to highlight the importance of these issues and to assess the impact of global risks on the predictability of asset returns of a small, open economy. We find that the forecast ability of the best Swiss predictive variable varies over time. This time variation is linked to global foreign currency risks.

Keywords: Bond market; business cycle; foreign exchange rate; predictability; risk premium; stock market (search for similar items in EconPapers)
JEL-codes: E32 F31 G15 G17 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2017
New Economics Papers: this item is included in nep-for and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2017-14

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