00000nam 2200000za 4500 9.844616 CaOODSP 20221107152801 cr ||||||||||| 170927s2017 oncd obs f000 0 eng d CaOODSP eng eng fre n-cn--- FB3-5/2017-38E-PDF Roberts, Tom, 1980- A counterfactual valuation of the stock index as a predictor of crashes [electronic resource] / by Tom Roberts. [Ottawa] : Bank of Canada, 2017. ii, 1, 58 p. : col. charts Bank of Canada staff working paper, 1701-9397 ; 2017-38 "September 2017." Includes bibliographical references (32-36). “Stock market fundamentals would not seem to meaningfully predict returns over ashorter-term horizon—instead, the author shifts focus to severe downside risk (i.e., crashes). The author uses the cointegrating relationship between the log S&P Composite Index and log earnings over 1871 to 2015, combined with smoothed earnings, to first construct a counterfactual valuation benchmark. The price-versus-benchmark residual shows an improved, and economically meaningful, logit estimation of the likelihood of a crash over alternatives such as the dividend yield and price momentum. Rolling out-of-sample estimates highlight the challenges in this task. Nevertheless, the overall results support the common popular belief that a higher stock market valuation in relation to fundamentals entails a higher risk of a crash"--Abstract, p. ii. Includes abstract in French. gccst Stock markets gccst Financial crisis gccst Forecasting Bank of Canada. Staff working paper (Bank of Canada) 1701-9397 ; 2017-38 (CaOODSP)9.806221 PDF 1.16 MB https://publications.gc.ca/collections/collection_2017/banque-bank-canada/FB3-5-2017-38-eng.pdf