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Author: Rakesh Kumar Publisher: ISBN: Category : Languages : en Pages : 12
Book Description
Stock market volatility is a matter of great interest for researchers and policy makers. The present study examines the volatility of daily, weekly and monthly stock returns in view of economic growth rate. It investigates the hypothesis that high economic growth rate tend to stabilize the investment decisions and create certainty among the investors. Under such situations, investors prevent to alter their investment decisions spontaneously with regard to good or bad news. A low growth rate, on the other hand, makes their investment decisions highly volatile. The study examines the Bombay stock exchange listed index BSE 100 data for the period from 1996 through 2007, wherein Indian economy has registered high and low growth rates. It also examines additional aspect of volatility with regards to expected and unexpected variations in stock returns by applying AR(1)-GARCH(1,1) model. The findings report that investors are not sensitive to economic growth rate for short period, but they become largely sensitive with the long investment horizons. The direct observations can be made here, volatility is invariable to economic growth rate in short time period, but investors with long investment horizons are largely affected by economic growth rate. Briefly, high volatility tends to associate with low economic growth rate and low volatility is associated with high economic growth rate.
Author: Rakesh Kumar Publisher: ISBN: Category : Languages : en Pages : 12
Book Description
Stock market volatility is a matter of great interest for researchers and policy makers. The present study examines the volatility of daily, weekly and monthly stock returns in view of economic growth rate. It investigates the hypothesis that high economic growth rate tend to stabilize the investment decisions and create certainty among the investors. Under such situations, investors prevent to alter their investment decisions spontaneously with regard to good or bad news. A low growth rate, on the other hand, makes their investment decisions highly volatile. The study examines the Bombay stock exchange listed index BSE 100 data for the period from 1996 through 2007, wherein Indian economy has registered high and low growth rates. It also examines additional aspect of volatility with regards to expected and unexpected variations in stock returns by applying AR(1)-GARCH(1,1) model. The findings report that investors are not sensitive to economic growth rate for short period, but they become largely sensitive with the long investment horizons. The direct observations can be made here, volatility is invariable to economic growth rate in short time period, but investors with long investment horizons are largely affected by economic growth rate. Briefly, high volatility tends to associate with low economic growth rate and low volatility is associated with high economic growth rate.
Author: Sean D. Campbell Publisher: ISBN: Category : Business cycles Languages : en Pages : 48
Book Description
"We explore the macro/finance interface in the context of equity markets. In particular, using half a century of Livingston expected business conditions data we characterize directly the impact of expected business conditions on expected excess stock returns. Expected business conditions consistently affect expected excess returns in a statistically and economically significant counter-cyclical fashion: depressed expected business conditions are associated with high expected excess returns. Moreover, inclusion of expected business conditions in otherwisestandard predictive return regressions substantially reduces the explanatory power of the conventional financial predictors, including the dividend yield, default premium, and term premium, while simultaneously increasing R-squared. Expected business conditions retain predictive power even after controlling for an important and recently introduced non-financial predictor, the generalized consumption/wealth ratio, which accords with the view that expected business conditions play a role in asset pricing different from and complementary to that of the consumption/wealth ratio. We argue that time-varying expected business conditions likely capture time-varying risk, while time-varying consumption/wealth may capture time-varying risk aversion"--National Bureau of Economic Research web site
Author: Padamja Khandelwal Publisher: ISBN: Category : Languages : en Pages : 46
Book Description
The sign of the relationship between expected stock market returns and volatility appears to vary over time; a result that seems at odds with basic notions of risk and return. In this paper we construct an economy where production involves the use of both labor and capital as inputs. We show that when capital investment is quot;stickyquot;, the sign of the relation between stock market risk and return varies in accordance with the supply of labor but requires no time variation in preferences. In particular, we show that for asset market equilibria where firms face an elastic supply of labor, the traditional positive risk-return relation obtains. Conversely, a negative relation obtains for asset market equilibria where there is positive probability that labor supply will be highly inelastic. A nice feature of our model is that, unlike earlier work, the sign of the stock market risk-return relation can be associated with observable features of the business cycle. Post World War II macroeconomic and stock return data are used to test the predictions from the model. Using standard measures of stock market volatility, our results provide support for a stock market risk-return relation that is negative at the peaks of business cycles and positive at the troughs.
Author: Robert A. Haugen Publisher: Pearson ISBN: Category : Actions (Titres de société) Languages : en Pages : 166
Book Description
It is now abundantly clear that stock volatility is a contagious disease that spreads virulently from market to market around the world. Price changes in one market drive subsequent price changes in that market as well as in others. In Beast, Haugen makes a compelling case for the fact that even under normal conditions, fully 80 percent of stock volatility is price driven. Moreover, this volatility is far from benign. It acts to reduce the level of investment spending and constitutes a significant and permanent drag on economic growth. Price-driven volatility is unstable. Dramatic and unpredictable explosions in price-driven volatility can send stock markets in a downward spiral and cause significant disruptions in economic activity. Haugen argues that this indeed happened in 1929 and 1930. If volatility in Asian markets persists, it can easily become the source of the problem rather than merely a symptom.
Author: Panos N. Patatoukas Publisher: ISBN: Category : Languages : en Pages : 44
Book Description
What is the link between stock returns and news about economic growth? Using consensus forecasts from the Philadelphia Fed's Survey of Professional Forecasters, I find that the univariate association between stock returns and GDP growth forecast surprises is indistinguishable from zero. While consistent with prior macro-finance research, this phenomenon is intriguing if one believes that the stock market should move in sync with the economy. I consider two non-mutually exclusive hypotheses for this puzzling phenomenon. The first hypothesis is that GDP growth forecast surprises are correlated with offsetting cash flow news and discount rate news. The second hypothesis is that GDP growth forecast surprises measure news about economic growth with noise. I extract a measure of market-level discount rate news using accounting data and find evidence consistent with the hypothesis of offsetting value-relevant news. Overall, the paper makes an important step towards resolving evidence of a disconnect between stock market returns and news about economic growth. More broadly, the paper illustrates how accounting constructs and methods can be applied to inform macro-finance questions.
Author: Huseyin Gulen Publisher: ISBN: Category : Economics Languages : en Pages : 35
Book Description
Is the value premium predictable? We study time-variations of the expected value premium using a two-state Markov switching model. We find that when conditional volatilities are high, the expected excess returns of value stocks are more sensitive to aggregate economic conditions than the expected excess returns of growth stocks. As a result, the expected value premium is time-varying: it spikes upward in the high-volatility state, only to decline more gradually in the ensuring periods. However, out-of-sample predictability of the value premium is close to nonexistent.
Author: Elroy Dimson Publisher: Princeton University Press ISBN: 9780691091945 Category : Business & Economics Languages : en Pages : 352
Book Description
Investors have too often extrapolated from recent experience. In the 1950s, who but the most rampant optimist would have dreamt that over the next fifty years the real return on equities would be 9% per year? Yet this is what happened in the U.S. stock market. The optimists triumphed. However, as Don Marquis observed, an optimist is someone who never had much experience. The authors of this book extend our experience across regions and across time. They present a comprehensive and consistent analysis of investment returns for equities, bonds, bills, currencies and inflation, spanning sixteen countries, from the end of the nineteenth century to the beginning of the twenty-first. This is achieved in a clear and simple way, with over 130 color diagrams that make comparison easy. Crucially, the authors analyze total returns, including reinvested income. They show that some historical indexes overstate long-term performance because they are contaminated by survivorship bias and that long-term stock returns are in most countries seriously overestimated, due to a focus on periods that with hindsight are known to have been successful. The book also provides the first comprehensive evidence on the long-term equity risk premium--the reward for bearing the risk of common stocks. The authors reveal whether the United States and United Kingdom have had unusually high stock market returns compared to other countries. The book covers the U.S., the U.K., Japan, France, Germany, Canada, Italy, Spain, Switzerland, Australia, the Netherlands, Sweden, Belgium, Ireland, Denmark, and South Africa. Triumph of the Optimists is required reading for investment professionals, financial economists, and investors. It will be the definitive reference in the field and consulted for years to come.
Author: A. R. Pagan Publisher: London : Centre for Decision Sciences and Econometrics, University of Western Ontario ISBN: Category : Econometric models Languages : en Pages : 52
Author: Rakesh Kumar
Author: Rakesh Kumar
Author: Sean D. Campbell
Author: Padamja Singal
Author: Padamja Khandelwal
Author: Robert A. Haugen
Author: Sean D. Campbell
Author: Panos N. Patatoukas
Author: Huseyin Gulen
Author: Elroy Dimson
Author: A. R. Pagan