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Full-Text Articles in Social and Behavioral Sciences
Forecasting Stock Returns In Good And Bad Times: The Role Of Market States, Dashan Huang, Fuwei Jiang, Jun Tu, Guofu Zhou
Forecasting Stock Returns In Good And Bad Times: The Role Of Market States, Dashan Huang, Fuwei Jiang, Jun Tu, Guofu Zhou
Research Collection Lee Kong Chian School Of Business
This paper proposes a two-state predictive regression model and shows that stock market 12-month return (TMR), the time-series momentum predictor of Moskowitz, Ooi, and Pedersen (2012), forecasts the aggregate stock market negatively in good times and positively in bad times. The out-of-sample R-squares are 0.96% and 1.72% in good and bad times, or 1.28% and 1.41% in NBER economic expansions and recessions, respectively. The TMR predictability pattern holds in the cross-section of U.S. stocks and the international markets. Our study shows that the absence of return predictability in good times, an important finding of recent studies, is largely driven by …
International Volatility Risk And Chinese Stock Return Predictability, Jian Chen, Fuwei Jiang, Yangshu Liu, Jun Tu
International Volatility Risk And Chinese Stock Return Predictability, Jian Chen, Fuwei Jiang, Yangshu Liu, Jun Tu
Research Collection Lee Kong Chian School Of Business
This paper investigates the predictive ability of international volatility risks for the daily Chinese stock market returns. We employ the innovations in implied volatility indexes of seven major international markets as our international volatility risk proxies. We find that international volatility risks are negatively associated with contemporaneous Chinese daily overnight stock returns, while positively forecast next-day Chinese daytime stock returns. The US volatility risk (ΔVIX) is particularly powerful in forecasting Chinese stock returns, and plays a dominant role relative to the other six international volatility measures. ΔVIX's forecasting power remains strong after controlling for Chinese domestic volatility and is robust …