Fabio Panetta () (Bank of Italy, Economic Research Department)
Abstract
This paper identifies the macroeconomic factors that influence Italian equity returns and tests the stability of their relation with securities returns. In the sixteen-year period that has been analyzed the relation between stock returns and the macroeconomic factors is found to be highly unstable: not only are the betas of individual securities virtually uncorrelated over time, but a high percentage of the shares experience a reversal of the sign of the estimated loadings. This result is not confined to single periods or to a small group of shares, but holds in different sub-periods and for securities in all risk classes. These findings suggest that empirical analysis of asset pricing should carefully investigate the specification of the return generating process and the stability of the risk measures.
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Find related papers by JEL classification: G12 - Financial Economics - - General Financial Markets - - - Asset Pricing E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
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