TY  - JOUR
AU  - Bekaert,Geert
AU  - Hodrick,Robert J.
TI  - Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3790
PY  - 1992
Y2  - August 1992
UR  - http://www.nber.org/papers/w3790
L1  - http://www.nber.org/papers/w3790.pdf
N1  - Author contact info:
Geert Bekaert
Graduate School of Business
Columbia University
3022 Broadway, 411 Uris Hall
New York, NY 10027
Tel: 212/854-9156
Fax: 212/662-8474
E-Mail: gb241@columbia.edu

Robert J. Hodrick
Graduate School of Business
Columbia University
3022 Broadway
New York, NY 10027
Tel: 212/854-3413
Fax: 212/316-9219
E-Mail: rh169@columbia.edu
AB  - The paper characterizes predictable components in excess rates of returns on major equity and foreign exchange markets using lagged excess returns, dividend yields, and forward premiums as instruments. Vector autoregressive techniques demonstrate one-step-ahead predictability and provide implied long-horizon statistics. We estimate latent variable models as constrained counterparts to the VARs. The predictability of returns is related to asset pricing models by examining the volatility bounds on intertemporal marginal rates of substitution.
ER  -