Mésalignements et volatilité
The paper considers forecasting regressions of US equities “realized volatility” on two misalignment measures defined by the temporary deviations from the common trend between valuation ratios (earning-price and dividend-price) and current inflation. Results show that these misalignments are useful to predict in-sample and out-of-sample stock market volatility at monthly horizons. The analysis also reveals a threshold effect where only misalignments exceeding a certain level of overvaluation have a positive and significant impact on future volatility. These suggest that the relationship between misalignments and future volatility is due to the presence of speculative bubbles.
Volume (Year): 121 (2011)
Issue (Month): 6 ()
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