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Value stocks have higher exposure to innovations in the nominal bond risk premium, which measures the markets' perception of cyclical variation in future output growth, than growth stocks. The ICAPM then predicts a value risk premium provided that good news about future output lowers the...
Persistent link: https://www.econbiz.de/10012462964
We recover prices of dividend strips on the aggregate stock market using data from derivatives markets. The price of a k-year dividend strip is the present value of the dividend paid in k years. The value of the stock market is the sum of all dividend strip prices across maturities. We study the...
Persistent link: https://www.econbiz.de/10012462202
We propose a latent variables approach within a present-value model to estimate the expected returns and expected dividend growth rates of the aggregate stock market. This approach aggregates information contained in the history of price-dividend ratios and dividend growth rates to predict...
Persistent link: https://www.econbiz.de/10012462393
Persistent link: https://www.econbiz.de/10003127137
Value stocks have higher exposure to innovations in the nominal bond risk premium, which measures the markets' perception of cyclical variation in future output growth, than growth stocks. The ICAPM then predicts a value risk premium provided that good news about future output lowers the...
Persistent link: https://www.econbiz.de/10013148389
Low realizations of the bond factors, typically at the onset of recessions, coincide with low value-minus-growth returns, low future dividend growth on value-minus-growth, and low future economic growth. This evidence supports the view that the business cycle is a priced state variable in stock...
Persistent link: https://www.econbiz.de/10013066875
"We propose an arbitrage-free stochastic discount factor (SDF) model that jointly prices the cross-section of returns on portfolios of stocks sorted on book-to-market dimension, the cross-section of government bonds sorted by maturity, the dynamics of bond yields, and time series variation in...
Persistent link: https://www.econbiz.de/10003933912
Persistent link: https://www.econbiz.de/10009500800
Persistent link: https://www.econbiz.de/10010188876
"We review the literature on return and cash flow growth predictability form the perspective of the present-value identity. We focus predominantly on recent work. Our emphasis is on U.S. aggregate stock return predictability, but we also discuss evidence from other asset classes and...
Persistent link: https://www.econbiz.de/10008808323