This paper demonstrates that a conditional version of the Capital Asset Pricing Model (CAPM) explains the cross section of expected returns, just as well as the three factor model of Fama and French. This is achieved by measuring beta (systematic risk) with short-, medium- and long-run...

This paper proposes a novel derivation of the Hodrick-Prescott, Department of Economics (HP) minimisation problem which leads to a generalisation of the Hodrick-Prescott filter. The main result is the development of a new filter to extract a localised maximum likelihood estimate of the cycle...

In this paper, we analyze the effect of monetary policy on credit spreads between yields on corporate bonds with different ratings over changing conditions in the economy. Using futures data on the fed funds rate, we distinguish between expected and unexpected changes in monetary policy. We find...

In this paper, we analyze whether the state of the limit order book affects future price movements in line with what recent theoretical models predict. We do this in a linear vector autoregressive system which includes midquote return, trade direction and variables that are theoretically...

We analyze whether it is better to forecast air travel demand using aggregate data at (say) a national level, or to aggregate the forecasts derived for individual airports using airport-specific data. We compare the US Federal Aviation Administration’s (FAA) practice of predicting the total...

We compare statistical and economic measures of forecasting performance across a large set of stock return prediction models with time-varying mean and volatility. We find that it is very common for models to produce higher out-of-sample mean squared forecast errors than a model assuming a...

We analyze whether it is better to forecast air travel demand using aggregate data at (say) a national level, or to aggregate the forecasts derived for individual airports using airport-specific data. We compare the US Federal Aviation Administration's (FAA) practice of predicting the total...

Little is known about the reactions of daily returns on portfolios with different characteristics to unexpected changes in macroeconomic conditions. This paper fills this void by analyzing the reactions of daily returns on portfolios formed on size and book-to-market ratio to news about a wide...

In this paper, we analyze the effect of monetary policy on yield spreads between corporate bonds with different credit ratings over changing conditions in the economy. Using futures data on the Fed funds rate, we distinguish between expected and unexpected changes in monetary policy. We find...

This paper analyzes the reaction of stock returns to news about the state of the economy. We develop a general equilibrium asset pricing model where the investor learns about the growth rate of the economy through two sources of information, dividend realizations and regularly scheduled...