Certainty of uncertainty for asset pricing

IF 2.1 2区 经济学 Q2 BUSINESS, FINANCE
Fuwei Jiang , Jie Kang , Lingchao Meng
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引用次数: 0

Abstract

Uncertainty is known to be crucial in asset pricing, yet evidence from a comprehensive analysis of various uncertainty measures remains sparse. By machine learning, we construct a novel economic uncertainty index derived from a heterogeneous range of uncertainty measures and investigate its predictability of stock returns. Our composite uncertainty index exhibits robust in- and out-of-sample predictability of stock market returns over the one- to 12-month horizon. The predictive power stems from the volatility-orthogonal components of individual uncertainty measures and becomes more pronounced during high uncertainty and high sentiment periods. The predictability of our economic uncertainty index aligns with theoretical frameworks linking uncertainty to future investment, cash flows, and market expectations.

资产定价的不确定性的确定性
众所周知,不确定性对资产定价至关重要,但对各种不确定性度量进行综合分析的证据仍然很少。通过机器学习,我们构建了一个新的经济不确定性指数,该指数源自一系列不同的不确定性指标,并研究了其对股票收益的预测能力。我们的综合不确定性指数在样本内和样本外对 1 至 12 个月的股市回报率都表现出稳健的预测能力。预测能力源于单个不确定性度量的波动性正交成分,在高不确定性和高情绪时期更为明显。我们的经济不确定性指数的可预测性符合将不确定性与未来投资、现金流和市场预期联系起来的理论框架。
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来源期刊
CiteScore
3.40
自引率
3.80%
发文量
59
期刊介绍: The Journal of Empirical Finance is a financial economics journal whose aim is to publish high quality articles in empirical finance. Empirical finance is interpreted broadly to include any type of empirical work in financial economics, financial econometrics, and also theoretical work with clear empirical implications, even when there is no empirical analysis. The Journal welcomes articles in all fields of finance, such as asset pricing, corporate finance, financial econometrics, banking, international finance, microstructure, behavioural finance, etc. The Editorial Team is willing to take risks on innovative research, controversial papers, and unusual approaches. We are also particularly interested in work produced by young scholars. The composition of the editorial board reflects such goals.
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