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Medientyp:
E-Artikel
Titel:
Davids, Goliaths, and Business Cycles
Beteiligte:
Duarte, Jefferson;
Kapadia, Nishad
Erschienen:
Cambridge University Press (CUP), 2017
Erschienen in:
Journal of Financial and Quantitative Analysis, 52 (2017) 6, Seite 2429-2460
Sprache:
Englisch
DOI:
10.1017/s0022109017000783
ISSN:
0022-1090;
1756-6916
Entstehung:
Anmerkungen:
Beschreibung:
We show that a simple, intuitive variable, Goliath versus David (GVD), reflects time variation in discount rates related to changes in aggregate business conditions. GVD is the annual change in the weight of the largest 250 firms in the aggregate stock market and is motivated by research that shows that small firms are more severely impacted than large firms by economic shocks due to differences in access to external finance. We find that GVD is the best single predictor of out-of-sample market returns among traditional predictors, predicting quarterly market returns with an out-of-sampleR2of 6.3% in the 1976–2011 evaluation period.