Working Paper: NBER ID: w11021
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: G1; G11; G12; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| amount of information utilized (D83) | predictability of stock returns (G17) |
| variance of expected returns (C29) | fluctuations in asset values (E32) |
| time-variation in expected returns (C22) | stock price movements (G12) |
| weak-form tests (C52) | no reliable evidence of predictability (D81) |
| semistrong-form tests (C12) | small but statistically and economically significant predictability (G17) |