Finance Seminar（2016-19）

Topic: Market Sentiment and Paradigm Shifts in Equity Premium Forecasting

Speaker: Jun Tu, Singapore Management University

Time: Wednesday, 19 October, 10:00-11:30

Place: Room 217, Guanghua Building 2

Abstract:

The equity premium forecasting literature has extensively examined the predictability of fundamental economic variables and non-fundamental variables, such as time-series momentum. In this paper, we find that the predictability of fundamental economic variables is significant (insignificant) during low (high) market sentiment periods. In contrast, the predictability of non-traditional variables is significant (insignificant) during high (low) market sentiment periods. Our findings suggest that the economic variables do have strong predicting power as long as the market sentiment is not too high to distort the fundamental link between economic variables and equity premium too much. As about 80% (20%) times can be classified as low (high) sentiment periods in our framework, our results indicate that economic variables could be a more prevalent force than non-fundamental variables in terms of predicting equity premium.

Introduction:

Dr. Jun Tu is an Associate Professor of Finance at Lee Kong Chian School of Business, Singapore Management University. His research interests focus on Hedge Funds and Private Equity, and Asset Pricing and Capital Markets. Dr. Jun Tu earned B.S. and M.S. in Mathematic from Wuhan University, and Ph.D. in Finance from Washinton University.

//www.smu.edu.sg/faculty/profile/9547/TU-Jun

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