TY  - UNPD
A1  - Schlag, Christian
A1  - Semenischev, Michael
A1  - Thimme, Julian
T1  - Predictability and the cross-section of expected returns: a challenge for asset pricing models
T2  - SAFE working paper series ; No. 289
N2  - Many modern macro finance models imply that excess returns on arbitrary assets are predictable via the price-dividend ratio and the variance risk premium of the aggregate stock market. We propose a simple empirical test for the ability of such a model to explain the cross-section of expected returns by sorting stocks based on the sensitivity of expected returns to these quantities. Models with only one uncertainty-related state variable, like the habit model or the long-run risks model, cannot pass this test. However, even extensions with more state variables mostly fail. We derive criteria models have to satisfy to produce expected return patterns in line with the data and discuss various examples.
T3  - SAFE working paper - 289 
KW  - sset pricing
KW  - cross-section of stock returns
KW  - predictability
Y1  - 2020
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/55248
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-552482
IS  - This version: August 28, 2020
PB  - SAFE
CY  - Frankfurt am Main
ER  -