Tower Building and Stock Market Returns
39 Pages Posted: 22 Mar 2011 Last revised: 14 Apr 2013
Date Written: April 9, 2013
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.
Keywords: Predictability, Stock Market, Dividend yield, Skyscrapers
JEL Classification: G12, G14
Suggested Citation: Suggested Citation