Financial Investment Opportunities and the Macroeconomy

Chen, Nai-Fu

doi:10.2307/2328835

Cited by 380 publications

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“…the difference between six-month commercial paper rate and six-month treasury bill rate, and the difference between ten-year and one-year treasury bonds rates) to offer better forecasts of business cycles than other variables. Studies such as Bernanke and Blinder (1989), Friedman and Kuttner (1989), Harvey (1989), Bernanke (1990), Chen (1991), and Estrella and Hardouvelis (1991) emphasize the forecasting power of term structure of interest rates for predicting real economic activities. McCallum (1994) and Rudebusch (1995) examine the forecasting content of long-short spread for future movements in the interest rates.…”

Section: Introductionmentioning

confidence: 99%

On the term structure of South African interest rates: cointegration and threshold adjustment

Iyke

2017

IJSE

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Section: Introductionmentioning

confidence: 99%

On the term structure of South African interest rates: cointegration and threshold adjustment

Iyke

2017

IJSE

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“…The literature on term spreads uses different measures of yield spread 7 . The adage that an inverted yield curve signals a recession was formalized empirically, by a number of researchers in the late 1980s, including Laurent (1988Laurent ( , 1989, Campbell Harvey (1988, 1989, Stock and Watson (1989), Chen (1991), and Estrella and Hardouvelis (1991). These studies mainly focused on using the term spread to predict output growth (or in the case of Harvey 1988, consumption growth) using U.S. data.…”

Section: Survey Of Literaturementioning

confidence: 99%

Yield spread as a leading indicator of Tunisian industrial production

Tarek¹

2013

International Journal of Management Excellence

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“…Contributions by Bodie (1976), Chen (1991), Chen, Roll and Ross (1986), Fama (1981), Geske and Roll (1983), and Flannery and Protopapadakis (2002) are pertinent for our paper.…”

Section: Fundamentalsmentioning

confidence: 99%

“…Chen, Roll, and Ross (1986) and Chen (1991) consider five macroeconomic variables: the growth rate of industrial production, expected inflation, unexpected inflation, a bond default risk premium, and a term structure spread to conclude that industrial production is a strong macroeconomic variable. Since industrial production in the U.S. has been steadily declining in significance and replaced by the service sector, Cutler, Poterba, and Summers (1986) find that industrial production is significantly and positively correlated with stock returns up to the mid-1980s but not in recent sub-periods.…”

Section: Fundamentalsmentioning

confidence: 99%

Dividends, Momentum, and Macroeconomic Variables as Determinants of the US Equity Premium Across Economic Regimes

Malliaris

Bhar²

2011

Review of Behavioral Finance

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The equity premium of the S&P 500 Index is explained in this paper by several variables that can be grouped into fundamental, behavioral and macroeconomic factors. We hypothesize that the statistical significance of these variables changes across economic regimes. The three regimes we consider are the low, medium and high volatility regimes in contrast to previous studies that do not differentiate across economic regimes. Using the three-state Markov switching regime econometric methodology we confirm that the statistical significance of the independent variables representing fundamentals, macroeconomic conditions and a behavioral variable changes across economic regimes. Our findings offer an improved understanding of what moves the equity premium across economic regimes than what we can learn from single-equation estimation. Our results also confirm the significance of momentum as a behavioral variable across all economic regimes.Key Words: Excess stock returns, equity premium, dividends, macroeconomic variables, momentum, Markov regimes. JEL Classification: C22, E44, G12Current Revised Version: February10, 2011. The authors are very grateful to Professor Ravi Jagannathan for a detailed review of an earlier version of this paper that contributed to a substantial improvement of our hypotheses formulation and econometric methodology. We are also thankful to Professor John Doukas for insightful clarifications on the selection of the appropriate behavioral variable. The presentation of this paper in various seminars in the U.S. and Australia has encouraged the authors enrich both the methodology and exposition of the paper. A detailed and constructive referee report has helped the authors to refocus the scope of this research and to enrich the presentation. Special thanks are offered to the anonymous referee and the editor of the Review of Behavioral Finance. Resubmitted to the REVIEW OF BEHAVIORAL FINANCE. This is the latest master copy dated March 25, 2011.This article is Emerald Publishing Limited and permission has been granted for this version to appear in Loyola eCommons. Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Publishing Limited. 2 Dividends, Momentum and Macroeconomic Variables as Determinants of the U.S. Equity Premium Across Economic Regimes AbstractThe equity premium of the S&P 500 Index is explained in this paper by several variables that can be grouped into fundamental, behavioral and macroeconomic factors. We hypothesize that the statistical significance of these variables changes across economic regimes. The three regimes we consider are the low, medium and high volatility regimes in contrast to previous studies that do not differentiate across economic regimes. Using the three-state Markov switching regime econometric methodology we confirm that the statistical significance of the independent variables representing fundamentals, macroeconomic conditions and a behavioral variable chang...

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Financial Investment Opportunities and the Macroeconomy

Cited by 380 publications

References 0 publications

On the term structure of South African interest rates: cointegration and threshold adjustment

On the term structure of South African interest rates: cointegration and threshold adjustment

Yield spread as a leading indicator of Tunisian industrial production

Dividends, Momentum, and Macroeconomic Variables as Determinants of the US Equity Premium Across Economic Regimes

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