Volatility Bounds, Size, and Real Activity Prediction

Belén Nieto and Gonzalo Rubio

Review of Finance, 2014, vol. 18, issue 1, 373-415

Abstract: This article shows how to extract future real activity information from optimally combined size-sorted portfolios. In particular, we analyze the capacity of the size-based model-free Hansen–Jagannathan volatility bound to predict future economic growth. We find that the volatility bound is a powerful in-sample and out-of-sample predictor of future industrial production growth. The asymmetric sensitivities of small and large companies through the business cycle explain our findings. Alternative volatility bounds estimated with sorting procedures based on book-to-market, momentum, or dividend yield do not show these asymmetric sensitivities or forecasting capacity of output growth.

Date: 2014
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1093/rof/rft003 (application/pdf)
Access to full text is restricted to subscribers.

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:oup:revfin:v:18:y:2014:i:1:p:373-415.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Review of Finance is currently edited by Marcin Kacperczyk

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().