Economics at your fingertips  

Unobservable systematic risk, economic activity and stock market

Roberto A. De Santis

Journal of Banking & Finance, 2018, vol. 97, issue C, 51-69

Abstract: I extract a latent systematic risk factor, which is orthogonal to idiosyncratic risk and observable systematic risk, from credit spreads for 1764 Eurobonds across euro area non-financial firms over the 1999–2015 period. The extracted common latent factor negatively predicts stock market excess returns, the growth rate in real economic activity and economic sentiment. It predicts the financial crisis and the two economic recessions.

Keywords: Corporate credit spreads; Excess bond premium; Forecasts; Euro area (search for similar items in EconPapers)
JEL-codes: C32 F36 G12 G15 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-01-19
Handle: RePEc:eee:jbfina:v:97:y:2018:i:c:p:51-69