'Deja Vol' Revisited: Survey Forecasts of Macroeconomic Variables Predict Volatility in the Cross-Section of Industry Portfolios

58 Pages Posted: 13 Jun 2018 Last revised: 5 Dec 2018

See all articles by Christian Conrad

Christian Conrad

Heidelberg University - Faculty of Economics and Social Studies

Alexander Glas

Heidelberg University

Date Written: December 3, 2018

Abstract

We investigate the question whether macroeconomic variables contain information about future stock volatility beyond that contained in past volatility. We show that forecasts of GDP and industrial production growth from the Federal Reserve's Survey of Professional Forecasters predict volatility in a cross-section of 49 industry portfolios. The expectation of higher growth rates is associated with lower stock volatility. Inflation forecasts predict higher or lower stock volatility depending on the state of the economy and the stance of monetary policy. Forecasts of higher unemployment rates are good news for stocks during expansions and go along with lower stock volatility. Our results hold in- as well as out-of-sample and pass various robustness checks.

Keywords: Realized Volatility, Survey of Professional Forecasters, Forecast Evaluation, Predictive Regressions

JEL Classification: E17, E37, G11, G17

Suggested Citation

Conrad, Christian and Glas, Alexander, 'Deja Vol' Revisited: Survey Forecasts of Macroeconomic Variables Predict Volatility in the Cross-Section of Industry Portfolios (December 3, 2018). Available at SSRN: https://ssrn.com/abstract=3186567 or http://dx.doi.org/10.2139/ssrn.3186567

Christian Conrad (Contact Author)

Heidelberg University - Faculty of Economics and Social Studies ( email )

Bergheimer Strasse 58
Heidelberg, D-69115
Germany
+49 (0)6221 54 3173 (Phone)

HOME PAGE: http://www.uni-heidelberg.de/conrad

Alexander Glas

Heidelberg University ( email )

Bergheimer Strassse 58
Heidelberg, D-69115
Germany

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