News Related to Future GDP Growth as Risk Factors in Equity Returns
44 Pages Posted: 26 Apr 2000
Date Written: January 2002
A model that includes a factor that captures news related to future Gross Domestic Product (GDP) growth along with the market factor, can explain the cross-section of equity returns about as well as the Fama-French model can. Furthermore, the Fama-French factors HML and SMB appear to contain mainly news related to future GDP growth. When news related to future GDP growth is present in the asset-pricing model, HML and SMB lose much of their ability to explain the cross-section.
Keywords: Asset Pricing, News, Future GDP, GMM
JEL Classification: G12
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