Tower Building and Stock Market Returns
University of Ulm - Department of Mathematics and Economics
April 9, 2013
Journal of Financial Research, Forthcoming
Construction starts of skyscrapers predict subsequent US stock returns. The predictive ability exceeds that of alternatives such as the prevailing historical mean, predictions based on dividend ratios and recently suggested combination forecasts. One explanation for these patterns is that tower building is indicative of over-optimism; alternatively, tower building could help to identify periods of low risk aversion. I present indirect evidence that is consistent with both explanations.
Number of Pages in PDF File: 39
Keywords: Predictability, Stock Market, Dividend yield, Skyscrapers
JEL Classification: G12, G14
Date posted: March 22, 2011 ; Last revised: April 14, 2013
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