Maio, P. and Philip, D. (2015) 'Macro variables and the components of stock returns.', Journal of empirical finance., 33 . pp. 287-308.
We conduct a decomposition for the stock market return by incorporating the information from 124 macro variables. Using factor analysis, we estimate six common factors and run a VAR containing these factors and financial variables such as the market dividend yield and the T-bill rate. Including the macro factors does not have a significant impact in the estimation of the components of aggregate (excess) stock returns—cash-flow, discount-rate, and interest-rate news. Using the macro factors in the computation of cash-flow and discount-rate news does not significantly improve the fit of a two-factor ICAPM for the cross-section of stock returns.
|Keywords:||Asset pricing, Macroeconomy and stock returns, Return decomposition, Stock return predictability, Discount-rate news, Cash-flow news, Intertemporal CAPM, Cross-section of stock returns, Factor analysis.|
|Full text:||(AM) Accepted Manuscript|
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|Publisher Web site:||http://dx.doi.org/10.1016/j.jempfin.2015.03.004|
|Publisher statement:||NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Empirical Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Empirical Finance, 33, September 2015, 10.1016/j.jempfin.2015.03.004.|
|Date accepted:||16 March 2015|
|Date deposited:||24 March 2015|
|Date of first online publication:||27 March 2015|
|Date first made open access:||27 August 2016|
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