Asset prices and economic fluctuations: The implications of stochastic volatility

作者：Chen Junping; Xiong Xiong; Zhu Jie; Zhu Xiaoneng

来源：Economic Modelling, 2017, 64: 128-140.

DOI：10.1016/j.econmod.2017.03.017

• Economic fluctuations
• Dynamic Fama-French factors
• Stochastic volatility
• International stock markets
• Predictability

This paper investigates whether the multi-factor stochastic volatility of stock returns is related to economic fluctuations and affects asset prices. We address these issues in a dynamic Fama-French three-factor volatility model framework. Consistent with the ICAPM with stochastic volatility (Campbell et al., 2017), we find that the conditional volatility of the size and value factors is significantly related to economic uncertainty. These volatilities are also significant pricing factors. The out-of-sample forecasting analysis further reveals that the conditional volatility can predict stock returns and deliver economic gain in asset allocation. Our analysis sharpens the understanding on the link between the stock market and economic fundamentals.

• 出版日期2017-8
• 单位上海大学; 上海财经大学; 天津大学