The variance risk premium represents the compensation paid to index option sellers for the risk of losses following upward movements in realized market return volatility. Common wisdom connects these spikes with elevated uncertainty on economic fundamentals. I incorporate this link within a...

We propose a Markov Switching Graphical Seemingly Unrelated Regression (MS-GSUR) model to investigate time-varying systemic risk based on a range of multi-factor asset pricing models. Methodologically, we develop a Markov Chain Monte Carlo (MCMC) scheme in which latent states are identified on...

We pit individual theoretical predictors of the equity premium against a variety of data-driven statistical methods. Theoretically motivated predictive regressions outperform conventional penalised regressions but have similar out-of-sample R2 and lower economic gains relative to more agnostic...