I assess time-series return predictability using a weighted least squares estimator that is around 25% more efficient than ordinary least squares (OLS) because it incorporates time-varying volatility into its point estimates. Traditional predictors, such as the dividend yield, perform better in-...

The shape of the VIX term structure conveys information about the price of variance risk rather than expected changes in the VIX, a rejection of the expectations hypothesis. A single principal component, Slope, summarizes nearly all this information, predicting the excess returns of S&P 500...

This study examines the predictive ability of various risk aversion indicators for future real economic activity (REA). Theoretically, the consumption capital asset pricing model and real business cycle model framework explain the role of the investor’s risk aversion. However, we show that...