Arbeitspapier
The equity risk premium and the low frequency of the term spread
We extract cycles in the term spread (TMS) and study their role for predicting the equity risk premium (ERP) using linear models. The low frequency component of the TMS is a strong and robust out-of-sample ERP predictor. It obtains out-of-sample R-squares (versus the historical mean benchmark) of 1.98% and 22.1% for monthly and annual data, respectively. It forecasts well also during expansions and outperforms several variables that have been proposed as good ERP predictors. Its predictability power comes exclusively from the discount rate channel. Contrarily, the high and business-cycle frequency components of the TMS are poor out-of-sample ERP predictors.
- ISBN
-
978-952-323-219-8
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Finland Research Discussion Papers ; No. 7/2018
- Klassifikation
-
Wirtschaft
Financial Econometrics
Portfolio Choice; Investment Decisions
Asset Pricing; Trading Volume; Bond Interest Rates
Financial Forecasting and Simulation
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Faria, Gonçalo
Verona, Fabio
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Finland
- (wo)
-
Helsinki
- (wann)
-
2018
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Faria, Gonçalo
- Verona, Fabio
- Bank of Finland
Entstanden
- 2018
Ähnliche Objekte (12)
Time-frequency forecast of the equity premium
Forecasting the equity risk premium with frequency-decomposed predictors
The effect of lenders' credit risk transfer activities on borrowing firms' equity returns
Why is equity capital expensive for opaque banks?
Should new or rapidly growing banks have more equity?
Banks' equity stakes in borrowing firms: A corporate finance approach
The determinants of global bank credit-default-swap spreads
The feasibility of through-the-cycle ratings
The power of forward guidance and the fiscal theory of the price level
The 1980s financial liberalization in the Nordic countries
On the role of the single currency ECU
The equilibrium exchange rate for the Finnish Markka
Time-frequency forecast of the equity premium
Forecasting the equity risk premium with frequency-decomposed predictors
The effect of lenders' credit risk transfer activities on borrowing firms' equity returns
Why is equity capital expensive for opaque banks?
Should new or rapidly growing banks have more equity?
Banks' equity stakes in borrowing firms: A corporate finance approach
The determinants of global bank credit-default-swap spreads
The feasibility of through-the-cycle ratings
The power of forward guidance and the fiscal theory of the price level
The 1980s financial liberalization in the Nordic countries
On the role of the single currency ECU
The equilibrium exchange rate for the Finnish Markka
Time-frequency forecast of the equity premium
Forecasting the equity risk premium with frequency-decomposed predictors
The effect of lenders' credit risk transfer activities on borrowing firms' equity returns
Why is equity capital expensive for opaque banks?
Should new or rapidly growing banks have more equity?
Banks' equity stakes in borrowing firms: A corporate finance approach
The determinants of global bank credit-default-swap spreads
The feasibility of through-the-cycle ratings
The power of forward guidance and the fiscal theory of the price level
The 1980s financial liberalization in the Nordic countries
On the role of the single currency ECU