Late to Recessions: Stocks and the Business Cycle

• 成果类型: Article
• 署名作者: Gomez-Cram, Roberto
• 署名单位: University of London; London Business School
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13100
• 发表日期: 2022
• 页码: 923-966
• 关键词: Long-run risks; equity premium; variance decomposition; PREDICTIVE REGRESSIONS; Expected returns; rare disasters; time; expectations; MARKET; performance

摘要

I find that returns are predictably negative for several months after the onset of recessions, becoming high only thereafter. I identify business cycle turning points by estimating a state-space model using macroeconomic data. Conditioning on the business cycle further reveals that returns exhibit momentum in recessions, whereas in expansions they display the mild reversals expected from discount rate changes. A strategy exploiting this pattern produces positive alphas. Using analyst forecast data, I show that my findings are consistent with investors' slow reaction to recessions. When expected returns are negative, analysts are too optimistic and their downward expectation revisions are exceptionally high.