Procyclical Stocks Earn Higher Returns

William Goetzmann, Akiko Watanabe and Masahiro Watanabe

No 32509, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We find that procyclical stocks, whose returns comove with business cycles, earn higher average returns than countercyclical stocks. We use almost a three-quarter century of real GDP growth expectations from economists’ surveys to determine forecasted economic states. This approach largely avoids the confounding effects of econometric forecasting model error. The loading on the expected real GDP growth rate is a priced risk measure. A fully tradable, ex-ante portfolio formed on this loading generates a procyclicality premium that is statistically significant, economically large, long-lasting over a few years, and independent of the size, book-to-market, and momentum effects.

JEL-codes: E32 E44 G12 G14 G17 (search for similar items in EconPapers)
Date: 2024-05
New Economics Papers: this item is included in nep-fdg, nep-fmk and nep-his
Note: AP
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w32509.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. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:32509

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w32509
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 National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().