Break Risk

• 成果类型: Article
• 署名作者: Smith, Simon C.; Timmermann, Allan
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors; University of California System; University of California San Diego
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa084
• 发表日期: 2021
• 页码: 2045
• 关键词: PREDICTIVE REGRESSIONS; equity premium; stock returns; predictability; likelihood; forecasts; sample; panels

摘要

We develop a new approach to modeling and predicting stock returns in the presence of breaks that simultaneously affect a large cross-section of stocks. Exploiting information in the cross-section enables us to detect breaks in return prediction models with little delay and to generate out-of-sample return forecasts that are significantly more accurate than those from existing approaches. To identify the economic sources of breaks, we explore the asset pricing restrictions implied by a present value model which links breaks in return predictability to breaks in the cash flow growth and discount rate processes.