Why Does Return Predictability Concentrate in Bad Times?

• 成果类型: Article
• 署名作者: Cujean, Julien; Hasler, Michael
• 署名单位: University System of Maryland; University of Maryland College Park; University of Toronto
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12544
• 发表日期: 2017
• 页码: 2717-2758
• 关键词: asset prices; heterogeneous beliefs; equity premium; stock returns; incomplete information; business cycles; cross-section; momentum; MARKET; volatility

摘要

We build an equilibrium model to explain why stock return predictability concentrates in bad times. The key feature is that investors use different forecasting models, and hence assess uncertainty differently. As economic conditions deteriorate, uncertainty rises and investors' opinions polarize. Disagreement thus spikes in bad times, causing returns to react to past news. This phenomenon creates a positive relation between disagreement and future returns. It also generates time-series momentum, which strengthens in bad times, increases with disagreement, and crashes after sharp market rebounds. We provide empirical support for these new predictions.