This article re-examines real interest parity (RIP), focusing upon which component of real interest parity drives convergence to parity. We find that it is the reversion of inflation rather than nominal interest rates which is the primary source of convergence to RIP. Nominal interest rate...

<italic>Ex post</italic> equity returns were extremely high during the latter part of the twentieth century and in particular during the 1990s. Many observers suggest <italic>ex post</italic> returns have been higher than expected returns. This article suggests, in the case of the UK, that the largest firms primarily cause the...

We explore whether economic links via trade affect aggregate Chinese stock market returns. We find that market return indices from countries that China net imports from can forecast the Chinese aggregate market return at the weekly time horizon. The stock returns of countries that China net...

Recent US research has suggested that market expected returns have fallen. Most studies propose this fall in market expected returns occurred during the 1990’s. Our UK empirical analysis finds a fall in expected returns in the 1990’s for the market index, but, in general, this is not evident...

We examine the UK equity premium over more than a century using dividend growth to estimate expectations of capital gains employing the approach of Fama and French (2002). Over recent decades estimated equity premia implied by dividend growth have been much lower than that produced by average...

This paper examines the UK equity premium over more than a century using dividend growth to estimate expectations of capital gains employing the approach of <link rid="b24">Fama and French (2002)</link>. Over recent decades estimated equity premia implied by dividend growth have been much lower than that produced by...

This study examines whether the output gap leads portfolio stock returns. The paper conducts in-sample and out-of-sample forecasting of US stock portfolios formed on the basis of size and value. First, the paper finds cross-sectional portfolios are predictable in-sample by the output gap....

Volatility is a key determinant of derivative prices and optimal hedge ratios. This paper examines whether there are structural breaks in commodity spot return volatility using an iterative cumulative sum of squares procedure and then uses GARCH (1,1) to model volatility during each regime.

This paper examines the dynamic relationship between stock prices and dividends using a structural cointegrated vector autoregression. The approach adopted fully identifies the system without imposing arbitrary restrictions and decomposes innovations into permanent and transitory components....