We show empirically that survey-based measures of expected inflation are significant and strong predictors of future aggregate stock returns in several industrialized countries both in-sample and out-of-sample. By empirically discriminating between competing sources of this return predictability...

Recent empirical evidence suggests that the variance risk premium predicts aggregate stock market returns. We demonstrate that statistical finite sample biases cannot “explain” this apparent predictability. Further corroborating the existing evidence of the U.S., we show that country...

Recent empirical evidence suggests that the variance risk premium predicts aggregate stock market returns. We demonstrate that statistical finite sample biases cannot “explain” this apparent predictability. Further corroborating the existing evidence of the U.S., we show that country...

We compare the performance of time-series (TS) and cross-sectional (CS) strategies based on past returns. While CS strategies are zero-net investment long/short strategies, TS strategies take on a time-varying net-long investment in risky assets. For individual stocks, the difference between the...

Recent advances in natural language processing have contributed to the development of market sentiment measures through text content analysis in news providers and social media. The effectiveness of these sentiment variables depends on the implemented techniques and the type of source on which...

Investor sentiment is believed to play an increasingly significant role in business and economic activities. By analyzing data collected from a sample of listed nonfinancial firms in Pakistan for the period 2009-2018, we quantify investor behavior and how it affects market returns, cash flows,...

We compare the stock return forecasting performance of alternative payout yields. The net payout yield produces more accurate forecasts relative to alternatives, including the traditional dividend yield. This remains true even after excluding several years during the Great Depression when...

We examine the pricing of tail risk in international stock markets. We find that the tail risk of different countries is highly integrated. Introducing a new World Fear index, we find that local and global aggregate market returns are mainly driven by global tail risk rather than local tail...

We combine annual stock market data for the most important equity markets of the last four centuries: the Netherlands/U.K. (1629-1812), U.K. (1813-1870) and U.S. (1871-2015). We show that dividend yields are stationary and consistently forecast returns. The documented predictability holds for...

This paper provides empirical evidence that volatility markets are integrated through the time-varying term structure of variance risk premia. These risk premia predict the returns from selling volatility for different horizons, maturities, and products, including variance swaps, straddles, and...