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GEMF

Grupo de Estudos Monetários e Financeiros

Estudos do GEMF, N.º 22 de 2013

   

Equity Premia Predictability in the EuroZone


Nuno Silva

GEMF / Faculdade de Economia, Universidade de Coimbra

Abstract:

In this paper, we studied the equity premium predictability in eleven EuroZone countries. Besides some traditional predictive variables, we have also chosen two other that, to our knowledge, have never been previously used in this literature: the change in the OECD normalized composite leading indicator and the change in the OECD business confidence indicator. The OECD indicators have shown a good performance, in particular during the early stages of the recent financial crisis. We also computed the utility gains that a mean-variance investor would have obtained, if he has used these forecasting variables, and concluded that, for most countries, the utility gains would have been considerable.

JEL Classification:
C22, C53, G11, G17.

Keywords:
International stock markets, Equity premia predictability, Asset allocation.

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