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Business Conditions and Speculative Assets
Author(s) -
Black Angela,
Fraser Patricia,
MacDonald Ronald
Publication year - 1997
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00070
Subject(s) - bond , econometrics , economics , multivariate statistics , maturity (psychological) , latent variable , ex ante , variable (mathematics) , business cycle , financial economics , monetary economics , finance , statistics , mathematics , macroeconomics , psychology , mathematical analysis , developmental psychology
In this paper we examine the hypothesis that the predictable components of U.K. shares and bonds are related to business conditions. Financial market variables, such as maturity and default premia, are constructed in an attempt to capture different components of business‐conditions risk. The hypothesis is investigated using multivariate regression analysis and a latent variable model. One of the main conclusions reached in this paper is that the time‐varying component of U.K. share and bond excess returns tends to exhibit varying degrees of sensitivity to information on business conditions as captured ex ante by a number of financial variables.