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What can we learn from financial stress indicator?

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  • Zhang, Dan
  • Li, Biangxiang

Abstract

This paper investigates whether the information of the financial stress index has predictive power for stock returns. The empirical results show that the financial stress index is efficient in predicting stock returns. In addition, the financial stress index can provide incremental information based on 14 traditional macroeconomic variables. Considering different investor risk aversion coefficients, the financial stress index has the highest CER and SR gains among the predictors. Our paper tries to provide new evidence for stock return predictability from the perspective of financial stress.

Suggested Citation

  • Zhang, Dan & Li, Biangxiang, 2022. "What can we learn from financial stress indicator?," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004767
    DOI: 10.1016/j.frl.2022.103293
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    References listed on IDEAS

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    Cited by:

    1. Marina Yu. Malkina & Rodion V. Balakin, 2023. "The Relation of Financial and Industrial Stresses to Monetary Policy Parameters in the Russian Economy," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 104-121, June.
    2. Martínez-Ruiz, Yessenia & Manotas-Duque, Diego Fernando & Ramírez-Malule, Howard, 2023. "Financial risk assessment of a district cooling system," Energy, Elsevier, vol. 278(PA).
    3. Naomi Pode-Shakked & Megan Slack & Nambirajan Sundaram & Ruth Schreiber & Kyle W. McCracken & Benjamin Dekel & Michael Helmrath & Raphael Kopan, 2023. "RAAS-deficient organoids indicate delayed angiogenesis as a possible cause for autosomal recessive renal tubular dysgenesis," Nature Communications, Nature, vol. 14(1), pages 1-18, December.

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