Good Times or Bad Times? Investors' Uncertainty and Stock Returns

• 成果类型: Article
• 署名作者: Ozoguz, Arzu
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhn097
• 发表日期: 2009
• 页码: 4377
• 关键词: CROSS-SECTIONAL TEST; Expected returns; incomplete information; MARKET-EFFICIENCY; excess volatility; asset-allocation; Equity returns; business-cycle; risk premia; long-run

摘要

This paper investigates empirically the dynamics of investors' beliefs and Bayesian uncertainty about the state of the economy as state variables that describe the time-variation in investment opportunities. Using measures of uncertainty constructed from the state probabilities estimated from two-state regime-switching models of aggregate market return and of aggregate output, I find a negative relationship between the level of uncertainty and asset valuations. This relationship shows substantial cross-sectional variation across portfolios sorted on size, book-to-market, and past returns, especially conditional on the state of the economy. I show that a conditional model with investors' beliefs and an uncertainty risk factor is remarkably successful in explaining a large part of the cross-sectional variation in average portfolio returns. The uncertainty risk factor retains its incremental explanatory power when compared to other conditional models such as the conditional CAPM. (JEL G12, G14 and D80)