Does Consumer Confidence or the Business Cycle Drive Expected Returns?

2012 ◽  
Author(s):  
Stig Vinther Møller ◽  
Jesper Rangvid ◽  
Henrik Nørholm
Keyword(s):  
Business Cycle ◽  
Consumer Confidence ◽  
Expected Returns ◽  
The Business Cycle

Getting Paid to Hedge: Why Don’t Investors Pay a Premium to Hedge Downturns?

2018 ◽  
Vol 54 (3) ◽  
pp. 1157-1192
Author(s):  
Nishad Kapadia ◽  
Barbara Bennett Ostdiek ◽  
James P. Weston ◽  
Morad Zekhnini
Keyword(s):  
Gross Domestic Product ◽  
Business Cycle ◽  
Expected Returns ◽  
Firm Characteristics ◽  
Cycle Frequency ◽  
Gross Domestic Product Growth ◽  
Market Index ◽  
Ex Ante ◽  
Out Of Sample ◽  
The Business Cycle

Stocks that hedge sustained market downturns should have low expected returns, but they do not. We use ex ante firm characteristics and covariances to construct a tradable safe minus risky (SMR) portfolio that hedges market downturns out of sample. Although downturns (peaks to troughs in market index levels at the business-cycle frequency) predict significant declines in gross domestic product growth, SMR has significant positive average returns and 4-factor alphas (both around 0.8% per month). Risk-based models do not explain SMR’s returns, but mispricing does. Risky stocks are overpriced when sentiment is high, resulting in subsequent returns of -0.9% per month.

Productivity growth, consumer confidence and the business cycle

1998 ◽  
Vol 42 (6) ◽  
pp. 1113-1140 ◽  
Author(s):  
Jean-Pierre Danthine ◽  
John B. Donaldson ◽  
Thore Johnsen
Keyword(s):  
Business Cycle ◽  
Productivity Growth ◽  
Consumer Confidence ◽  
The Business Cycle

Stock Returns and the Business Cycle

CFA Digest ◽  
2005 ◽  
Vol 35 (2) ◽  
pp. 42-43
Author(s):  
Daniel B. Cashion
Keyword(s):  
Business Cycle ◽  
Stock Returns ◽  
The Business Cycle
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