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News Related to Future GDP Growth as a Risk Factor in Equity Returns

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  • Vassalou, Maria
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    Abstract

    A model that includes a factor that captures news related to future Gross Domestic Product (GDP) growth along with the market factor can explain the cross-section of equity returns about as well as the Fama-French model can. Furthermore, the Fama-French factors HML and SMB appear to contain mainly news related to future GDP growth. When news related to future GDP growth is present in the asset-pricing model, HML and SMB lose their ability to explain the cross-section.

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    Bibliographic Info

    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3057.

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    Date of creation: Nov 2001
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    Handle: RePEc:cpr:ceprdp:3057

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    Related research

    Keywords: asset pricing; future GDP; GMM; news;

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    Cited by:
    1. Locarno, Alberto & Massa, Massimo, 2005. "Monetary Policy Uncertainty and the Stock Market," CEPR Discussion Papers 4828, C.E.P.R. Discussion Papers.
    2. Dahlquist, Magnus & Sallstrom, Torbjorn, 2002. "An Evaluation of International Asset Pricing Models," CEPR Discussion Papers 3145, C.E.P.R. Discussion Papers.

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