Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets

Geert Bekaert () and Robert James Hodrick ()

No 3790, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The paper characterizes predictable components in excess rates of returns on major equity and foreign exchange markets using lagged excess returns, dividend yields, and forward premiums as instruments. Vector autoregressive techniques demonstrate one-step-ahead predictability and provide implied long-horizon statistics. We estimate latent variable models as constrained counterparts to the VARs. The predictability of returns is related to asset pricing models by examining the volatility bounds on intertemporal marginal rates of substitution.

Date: Written 1992-08
Note: ITI ME IFM
View list of references View citations in EconPapers

Published as Journal of Finance, Vol. 47, No. 2 (June 1992): 467-509.

Downloads: (external link)
http://www.nber.org/papers/w3790.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Journal Article: Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets (1992)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3790
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().