The paper considers forecasting regressions of US equities ?realized volatility? on two misalignment measures defined by the temporary deviations from the common trend between valuation ratios (earning-price and dividend-price) and current inflation. Results show that these misalignments are...

The Great Moderation and Stock Valuation Using quarterly data since 1953, we estimate a fundamental-based empirical model for the US real stock prices and earning-price ratio. Applying the VECM methodology instead of traditional VAR to explain low frequency movements of stock valuation, we...