We decompose stock market returns into cash flow news and discount rate news and show that an increase (decrease) in discount rate news, which reflects an increase in the quantity of risk or level of risk aversion in the economy, predicts a decrease (increase) in future aggregate output....

This paper develops an empirical test of the q-theory production based asset pricing model. In general equilibrium, with habit utility and adjustment costs of investment, it must be the case that when the consumption surplus predicts stock returns corresponding investment patterns must predict...

Time variation in the discount rate affects investment and employment decisions in a manner consistent with Q-theory predictions. This evidence is uncovered when using cyclical consumption as proxy for the discount rate. The results, which are consistent across both U.S. and international data,...

We show that time variation in the discount rate affects investment and employment decisions in a manner consistent with both short and long run Q-theory predictions. Uncovering this novel evidence requires a proxy for the discount rate that reliably predicts stock returns. We gain further...

Value and momentum returns and combinations of them are explained by their loadings on global macroeconomic risk factors across both countries and asset classes. These loadings describe why value and momentum have positive return premia while at the same time being negatively correlated. The...

This paper introduces a novel consumption-based variable, cyclical consumption, and examines its predictive properties for stock returns. Future expected stock returns are high (low) when aggregate consumption falls (rises) relative to its trend and marginal utility from current consumption is...

Rapach, Ringgenberg and Zhou (2016) claim that for the sample period 1973 to 2014 "short interest is arguably the strongest known predictor of aggregate stock returns", that it "outperforms a host of popular predictors", and that it represents "informed traders who are able to anticipate changes...

The launch of the single currency in Europe in January 1999 was preceded by a period of regulatory harmonization, convergence in bond yields and inflation rates, and strict fiscal policy across the Eurozone countries. We examine whether the 1990s also were characterized by increased stock market...