Finance Brown Bag Seminar（2016-03）

Topic: Forecasting Stock Returns in Good and Bad Times: The Role of Market States

Speaker: Fuwei Jiang, Central University of Finance and Economics

Time: Friday, 3 June, 12:00-13:00

Place: Room 217, Guanghua Building 2

Abstract:

This paper proposes a state-dependent predictive regression model and finds that stock market performance in excess of its mean (PEM), a predictor closely related to the time series momentum predictor of Moskowitz, Ooi, and Pedersen (2012), forecasts the aggregate stock market negatively in good times and positively in bad times. The out-of-sample R2s are 1.95% and 2.04% in good and bad times, or 2.06% and 1.84% in NBER economic expansions and recessions, respectively. The predictability pattern of the PEM holds in the cross-section of U.S. stocks as well as in the international markets. Our study shows that concentration of return predictability in bad times, an important finding of recent studies, is largely driven by the use of the popular one-state predictive regression model.

Introduction:

Dr. Fuwei Jiang is an Associate Professor of Finance at the School of Finance of Central University of Finance and Economics (CUFE) in Beijing. He earned PhD in Finance from Singapore Management University in June 2014, and served as Assistant Professor in CUFE from 2014 to 2015. His main research area lies in asset pricing, return predictability, anomalies, behavioral finance, and Chinese financial markets.

//fuweijiang.weebly.com/

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