Working Paper: NBER ID: w10689
Authors: Wayne E. Ferson; Andrea Heuson; Tie Su
Abstract: This paper makes indirect inference about the time-variation in expected stock returns by comparing unconditional sample variances to estimates of expected conditional variances. The evidence reveals more predictability as more information is used, and no evidence that predictability has diminished in recent years. Semi-strong form evidence suggests that time-variation in expected returns remains economically important.
Keywords: No keywords provided
JEL Codes: G0; G1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| more information utilized (D89) | more predictability in stock returns (G17) |
| semistrong form evidence (C20) | time variation in expected returns (G17) |
| weak-form tests (C52) | no reliable evidence of predictability (D81) |
| semistrong form tests (C12) | small but statistically and economically significant predictability (G17) |
| small changes in expected returns (G40) | large fluctuations in asset values (E32) |