Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/128041 
Year of Publication: 
2006
Series/Report no.: 
Working Paper No. 06.04
Publisher: 
Swiss National Bank, Study Center Gerzensee, Gerzensee
Abstract: 
There is widespread evidence of excess return predictability in .nancial markets. In this paper we examine whether this predictability is related to expectational errors. To consider this issue, we use data on survey expectations of market participants in the stock market, the foreign exchange market, and the bond and money markets in various countries. We find that the predictability of expectational errors coincides with the predictability of excess returns: when a variable predicts expectational errors in a given market, it typically predicts the excess return as well. Understanding expectational errors appears crucial for explaining excess return predictability.
Document Type: 
Working Paper

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