Publicação
Forecasting the equity risk premium with frequency-decomposed predictors
| dc.contributor.author | Faria, Gonçalo | |
| dc.contributor.author | Verona, Fabio | |
| dc.date.accessioned | 2018-07-05T16:18:27Z | |
| dc.date.available | 2018-07-05T16:18:27Z | |
| dc.date.issued | 2016 | |
| dc.description.abstract | We show that the out-of-sample forecast of the equity risk premium can b e signi cantly improved by taking into account the frequency-domain relationship b etween the equity risk premium and several p otential predictors. We consider fteen predictors from the existing literature, for the out-of-sample forecasting p erio d from January 1990 to Decemb er 2014. The b est result achieved for individual predictors is a monthly out-of-sample R 2 of 2.98 % and utility gains of 549 basis p oints p er year for a mean-variance investor. This p erformance is improved even further when the individual forecasts from the frequency- decomp osed predictors are combined. These results are robust for di erent subsamples, including the Great Mo deration p erio d, the Great Financial Crisis p erio d and, more generically, p erio ds of bad, normal and go o d economic growth. The strong and robust p erformance of this metho d comes from its ability to disentangle the information aggregated in the original time series of each variable, which allows to isolate the frequencies of the predictors with the highest predictive p ower from the noisy parts. | pt_PT |
| dc.description.version | info:eu-repo/semantics/publishedVersion | pt_PT |
| dc.identifier.citation | Faria, G., Verona, F. (2016). Forecasting the equity risk premium with frequency-decomposed predictors. Working papers: Economics. N.º 6, 40 p. | pt_PT |
| dc.identifier.uri | http://hdl.handle.net/10400.14/25178 | |
| dc.language.iso | eng | pt_PT |
| dc.peerreviewed | no | pt_PT |
| dc.rights.uri | http://creativecommons.org/licenses/by/4.0/ | pt_PT |
| dc.subject | Predictability | pt_PT |
| dc.subject | Equity risk premium | pt_PT |
| dc.subject | Frequency domain | pt_PT |
| dc.subject | Discrete wavelets | pt_PT |
| dc.title | Forecasting the equity risk premium with frequency-decomposed predictors | pt_PT |
| dc.type | working paper | |
| dspace.entity.type | Publication | |
| oaire.citation.title | Working papers: Economics | pt_PT |
| rcaap.rights | openAccess | pt_PT |
| rcaap.type | workingPaper | pt_PT |
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