Time-varying short-horizon predictability

Sam Henkel (), J. Spencer Martin and Federico Nardari

Journal of Financial Economics, 2011, vol. 99, issue 3, 560-580

Abstract: In the G7 countries, the short-horizon performance of aggregate return predictors such as the dividend yield and the short rate appears non-existent during business cycle expansions but sizable during contractions. This phenomenon appears related to countercyclical risk premiums as well as the time-variation in the dynamics of predictors. Our empirical model outperforms the historical average out-of-sample in the US, but the results throughout the G7 are mixed.

Keywords: Stock; return; predictability; Asset; pricing; Business; fluctuations; Financial; markets; and; the; macroeconomy (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (232)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:99:y:2011:i:3:p:560-580

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