'Deja Vol' Revisited : Survey Forecasts of Macroeconomic Variables Predict Volatility in the Cross-Section of Industry Portfolios

We investigate the question whether macroeconomic variables contain information about future stock volatility beyond that contained in past volatility. We show that forecasts of GDP and industrial production growth from the Federal Reserve's Survey of Professional Forecasters predict volatility in a cross-section of 49 industry portfolios. The expectation of higher growth rates is associated with lower stock volatility. Inflation forecasts predict higher or lower stock volatility depending on the state of the economy and the stance of monetary policy. Forecasts of higher unemployment rates are good news for stocks during expansions and go along with lower stock volatility. Our results hold in- as well as out-of-sample and pass various robustness checks