A counterfactual valuation of the stock index as a predictor of crashes / by Tom Roberts.: FB3-5/2017-38E-PDF
“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.
Permanent link to this Catalogue record:
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| Title | A counterfactual valuation of the stock index as a predictor of crashes / by Tom Roberts. |
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| Publication type | Monograph - View Master Record |
| Language | [English] |
| Format | Digital text |
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| Description | ii, 1, 58 p. : col. charts |
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