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Macroeconomic Expectations and Expected Returns
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DOI：10.1017/S0022109024000279.png)
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Abstract
En 中文
Using the macroeconomic forecasts of professional economists, we construct a comprehensive macro condition index that summarizes subjective expectations of output, inflation, and labor and housing market conditions. The index predicts stock returns and produces countercyclical equity premium forecasts, both in- and out-of-sample. Our results contrast with the procyclical subjective equity premia documented in recent literature. We show that the index reflects the true but unobserved macroeconomic condition that impacts the equity premium. Moreover, the predictability is not affected by belief biases and operates via a discount rate channel. The index's predictability conforms to an explanation based on time-varying risk premia.
Keywords:
VARYING RISK PREMIUMS
STOCK RETURNS
BUSINESS CONDITIONS
INVESTOR SENTIMENT
CONSUMPTION
PERFORMANCE
INFERENCE
FRAMEWORK
OUTPUT
SAMPLE
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