publication . Article . Preprint . 2001

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

Maria Vassalou;
Open Access
  • Published: 01 Nov 2001 Journal: CFA Digest, volume 33, pages 47-48 (issn: 0046-9777, eissn: 1938-3320, Copyright policy)
  • Publisher: CFA Institute
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.
Subjects
free text keywords: asset pricing; future GDP; GMM; news, Strategy and Management, Economics and Econometrics, Accounting, Finance, Risk factor, Financial economics, Economics, Real gross domestic product, Equity (finance), Equity risk, Intertemporal CAPM, GDP deflator, Gross domestic product, Gross private domestic investment, Capital asset pricing model, jel:G12
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