Output and expected returns
By Jesper Rangvid. 2006
116 citations recorded by the source corpus.
Abstract This paper shows for 1929–2003 U.S. data and also for international G-7 data that the ratio of share prices to GDP tracks a large fraction of the variation over time in expected returns on the aggregate stock market, capturing more of that variation than do price–earnings and price–dividend ratios and often also providing additional information about excess returns. The price–output ratio tracks long-term U.S. cumulative stock returns almost as well as the cay-ratio of Lettau and Ludvigson [2001a. Journal of Finance 56, 815–849, 2005. Journal of Financial Economics 76, 583–626], although the cay-ratio tracks variation in U.S. excess returns better. The price–output ratio, however, involves no parameter estimation and is easily constructed for non-U.S. countries.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/85bb8408880d2615c9cc4bca31f1b4fab6977336
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Economics and Econometrics
- George Panayotov
- Gurdip Bakshi
- Po-Hsuan Hsu
- Georgios Skoulakis
- V. Todorov
- Liuren Wu
- Nikolai L. Roussanov
- David S. Bates
In Finance
- George Panayotov
- Gurdip Bakshi
- Po-Hsuan Hsu
- Georgios Skoulakis
- Liuren Wu
- V. Todorov
- David S. Bates
- Mikhail Chernov
Citations in the corpus
- The Baltic Dry Index as a Predictor of Global Stock Returns, Commodity Returns, and Global Economic Activity (2010, background): “…evidence for the predictive links between the real economy and the financial sector (e.g., Fama (1990), Cochrane (1991), Vassalou and Liew (2000), Vassalou (2003), Rangvid (2006), and Belo (2010)), testifying to the possible validity of such links on a more global scale than previously documented.”
- Technological Innovations and Aggregate Risk Premiums (2009, background): “15The Newey-West standard errors are adopted so that my testing results are comparable with recent papers in market return predictability (e.g., Lettau and Ludvigson, 2001; Rangvid, 2006; Liu and Zhang, 2008).”
- Macroeconomic Conditions and Capital Structure Adjustment Speed (2010, unknown): “This price-output ratio has been shown to track a substantial fraction of variation in both expected returns and excess returns on the aggregate stock market, capturing a larger fraction of this variation than price-earnings and price-dividend ratios (Rangvid, 2006).”