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ABSTRACT This study examines stock return predictability in business cycle fluctuations across 17 developed countries and 26 developing countries over the period from January 1970 to December 2019. We uncover… Click to show full abstract
ABSTRACT This study examines stock return predictability in business cycle fluctuations across 17 developed countries and 26 developing countries over the period from January 1970 to December 2019. We uncover that lagged U.S. returns can be regarded as a reliable predictor only during recessions. The results remain robust after controlling for commonly used return predictors. Our empirical findings carry some implications for the role of leading markets, fundamental uncertainty, change in investors’ beliefs and dynamics of stock return volatility in economic downturns.
Journal Title: Applied Economics
Year Published: 2020
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