This paper focuses on two popular predictive variables that are often used to forecast stock market returns: the dividend yield and the price earnings ratio. First, we question the theoretical premise that the dividend yield ought to have predictive power for the aggregate stock market. By...

The question of long-run predictability in the aggregate US stock market is still unsettled. This is due to the lack of a robust method to judge the statistical significance of long-run regressions under the maintained hypothesis. By developing a spectral theory of long-run regressions with both...

Long-run regression models using trailing earnings over price ratio to predict future returns suggested by Campbell and Shiller (1988, 2001) work quite well. However, in this note we show that this variable might result in a downward biased proxy for expected future returns. Instead we suggest...

The question of predictability in the aggregate US stock market is still unsettled. This is due to the lack of a robust method to judge the statistical significance of long run regressions. By developing a spectral theory of long run regressions we demonstrate that asymptotically correct...

In this paper we examine the information content of options on the Danish KFX share index. These options are traded very infrequently and with a low volume. We consider the relationship between the volatility implied in an option's price and the subsequently realized volatility. Recently,...

In analyzing the relation between implied and realized volatility, researchers confront samples that have a high degree of overlap, which quot;telescopesquot; as option maturities are reached. With volatility samples of this nature, we show that the regression coefficients are disperse even in...

In this paper we analyze the empirical properties of the volatility implied in options on the 13-week US Treasury bill using both ITM, ATM, and OTM options. This market has not been studied previously. Moreover, these options are interesting because they are identical to options written on...

Long-run regression models using the trailing earnings over price ratio to predict future returns suggested by Campbell and Shiller (1988, 2001) work quite well. However, in this note, we show that this variable might result in a downward biased proxy for expected future returns. Instead, we...

We consider the relation between the volatility implied in an option's price and the subsequently realized volatility. Earlier studies on stock index options have found biases and inefficiencies in implied volatility as a forecast of future volatility. More recently, Christensen and Prabhala...