ABSTRACT We examine the pricing of aggregate volatility risk in cross‐section stock returns. Consistent with theory, we find that stocks high sensitivities to innovations have low average Stocks idiosyncratic relative Fama and French (1993, Journal Financial Economics 25, 2349) model abysmally This phenomenon cannot be explained by exposure risk. Size, book‐to‐market, momentum, liquidity effects account for either returns earned systematic or volatility.

Journal Article International Asset Allocation With Regime Shifts Get access Andrew Ang, Ang Columbia University and National Bureau of Economic Research Address correspondence to Business School, 3022 Broadway, New York, NY 10027, or e-mail: aa610@columbia.edu. Search for other works by this author on: Oxford Academic Google Scholar Geert Bekaert The Review Financial Studies, Volume 15, Issue 4, July 2002, Pages 1137–1187, https://doi.org/10.1093/rfs/15.4.1137 Published: 16 June 2015

We examine the predictive power of dividend yields for forecasting excess returns, cash flows, and interest rates. Dividend predict returns only at short horizons together with rate do not have any long-horizon power. At horizons, strongly negatively predicts returns. These results are robust in international data due to lack A present value model that matches shows discount movements play a large role explaining variation yields. Finally, we find earnings significantly future flows. (JEL...

Economists have long recognized that investors care differently about downside losses versus upside gains. Agents who place greater weight on risk demand additional compensation for holding stocks with high sensitivities to market movements. We show the cross section of stock returns reflects a premium approximately 6% per annum. Stocks covary strongly during declines average returns. The reward beasring is not simply regular beta, nor it explained by coskewness or liquidity risk, size,...

AbstractWe examine the econometric performance of regime-switching models for interest rate data from United States, Germany, and Kingdom. Regime-switching forecast better out-ofsample than single-regime models, including an affine multifactor model, but do not always match moments very well. incorporating international short-rate term spread information better, sample classify regimes univariate models. Finally, in rates correspond reasonably well with business cycles, at least States.KEY...

ABSTRACT Changes in nominal interest rates must be due to either movements real rates, expected inflation, or the inflation risk premium. We develop a term structure model with regime switches, time‐varying prices of risk, and identify these components yield curve. find that unconditional rate curve United States is fairly flat around 1.3%. In one regime, steeply downward sloping. An premium increases maturity fully accounts for generally upward sloping structure.

We ask whether stock returns in France, Germany, the UK and US are predictable by three instruments: dividend yield, earnings yield short rate. The predictability regression is suggested a present value model with growth, payout ratios rate as state variables. use this imposing constant risk premium to examine finite sample evidence on predictability. Not only do we find be relevant variable theoretically, it also robust short-run predictor of equity returns. Lamont (1998) not our increased...

Regime-switching models can match the tendency of financial markets to often change their behavior abruptly and phenomenon that new variables persists for several periods after such a change. Although regimes captured by regime-switching are identified an econometric procedure, they correspond different in regulation, policy, other secular changes. In empirical estimates, means, volatilities, autocorrelations, cross-covariances asset returns differ across manner allows capture stylized many...

ABSTRACT Stocks with large increases in call (put) implied volatilities over the previous month tend to have high (low) future returns. Sorting stocks ranked into decile portfolios by past produces spreads average returns of approximately 1% per month, and return differences persist up six months. The cross section stock also predicts option volatilities, tending put contracts that exhibit volatility next but decreasing realized volatility. These predictability patterns are consistent...

Chengtou bond is the only asset with market prices that can capture funding cost of Chinese local government debt. In contrast to U.S. municipal bonds, bonds are issued by private corporations but implicitly guaranteed and central governments, which reflected novel risk characteristics—real estate GDP political risk. One standard deviation increase in real (political risk) corresponds 10 (9) basis points decrease (increase) yields, respectively. However, conditional on risk, actually...

Correlations between US stocks and the aggregate market are much greater for downside moves, especially extreme than upside moves. We develop a new statistic measuring, comparing testing asymmetries in conditional correlations. Conditional on downside, correlations data differ from implied by normal distribution 11.6%. find that asymmetric fundamentally different other measures of asymmetry like skewness co-skewness. small stocks, value past loser have more movements. Controlling size, we...

Stocks with recent past high idiosyncratic volatility have low future average returns around the world. Across 23 developed markets, difference in between extreme quintile portfolios sorted on is -1.31% per month, after controlling for world market, size, and value factors. The effect individually significant each G7 country. In U.S., we rule out explanations based trading frictions, information dissemination, higher moments. There strong comovement to stocks across countries, suggesting...

Surveys do! We examine the forecasting power of four alternative methods U.S. inflation out-of-sample: time series ARIMA models; regressions using real activity measures motivated from Phillips curve; term structure models that include linear, non-linear, and arbitrage-free specifications; survey-based measures. also investigate several combining forecasts. Our results show surveys outperform other specifications perform relatively poorly. find little evidence forecasts produces superior to...