Journal of Monetary Economics 2015 DOI: 10.1016/j.jmoneco.2015.06.004 View full text
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Sudheer Chava, Michael Gallmeyer, Heungju Park

Abstract: a b s t r a c t U.S. stock return predictability is analyzed using a measure of credit standards (Standards) derived from the Federal Reserve Board's Senior Loan Officer Opinion Survey on Bank Lending Practices. Standards is a strong predictor of stock returns at a business cycle frequency, especially in the post-1990 data period. Empirically, a tightening of Standards predicts lower future stock returns. Standards performs well both in-sample and out-ofsample and is robust to a host of consistency checks. St…

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