Economics at your fingertips  

Credit conditions and stock return predictability

Sudheer Chava, Michael Gallmeyer () and Heungju Park

Journal of Monetary Economics, 2015, vol. 74, issue C, 117-132

Abstract: U.S. stock return predictability is analyzed using a measure of credit standards (Standards) derived from the Federal Reserve Board׳s Senior Loan Officer Opinion Survey on Bank Lending Practices. Standards is a strong predictor of stock returns at a business cycle frequency, especially in the post-1990 data period. Empirically, a tightening of Standards predicts lower future stock returns. Standards performs well both in-sample and out-of-sample and is robust to a host of consistency checks. Standards captures stock return predictability at a business cycle frequency and is driven primarily by the ability of Standards to predict cash flow news.

Keywords: Stock predictability; Credit supply; Macroeconomics; Survey data (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) 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:

DOI: 10.1016/j.jmoneco.2015.06.004

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2021-01-20
Handle: RePEc:eee:moneco:v:74:y:2015:i:c:p:117-132