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Working Paper
Capital market imperfections and the incentive to lease
Working Paper
Reexamining stock valuation and inflation: the implications of analysts' earnings forecasts
This paper examines the effect of inflation on stock valuations and expected long-run returns. Ex ante estimates of expected long-run returns are constructed by incorporating analysts' earnings forecasts into a variant of the Campbell-Shiller dividend-price ratio model. The negative relation between equity valuations and expected inflation is found to be the result of two effects: a rise in expected inflation coincides with both (i) lower expected real earnings growth and (ii) higher required real returns. The earnings channel mostly reflects a negative relation between expected long-term ...
Conference Paper
Does lending by banks and finance companies differ?
Conference Paper
Expectations of risk and return among household investors: Are their Sharpe ratios countercyclical?
Data obtained from special questions on the Michigan Survey of Consumer Attitudes are used to analyze stock market beliefs and portfolio choices of household investors. We find that expected risk and return are strongly influenced by economic prospects. When investors believe macroeconomic conditions are more expansionary, they tend to expect both higher returns and lower volatility. This implies that household Sharpe ratios are procyclical, which is inconsistent with the view that stock market returns should compensate investors for exposure to macroeconomic risks. The finding of procyclical ...
Working Paper
What's the Story? A New Perspective on the Value of Economic Forecasts
We apply textual analysis tools to measure the degree of optimism versus pessimism of the text that describes Federal Reserve Board forecasts published in the Greenbook. The resulting measure of Greenbook text sentiment, ?Tonality,? is found to be strongly correlated, in the intuitive direction, with the Greenbook point forecast for key economic variables such as unemployment and inflation. We then examine whether Tonality has incremental power for predicting unemployment, GDP growth, and inflation up to four quarters ahead. We find it to have significant and substantive predictive power for ...