Predicting returns on asset markets of a small, open economy and the influence of global risks

November 22, 2017
Issue 2017-14

Summary

Stylized facts of asset return predictability are mainly based on evidence from the US, a large, closed economy, and, hence, are not necessarily representative of small, open economies. Furthermore, discountrate news mainly drive US asset returns. This is not the case in other economies. We use Switzerland as example to highlight the importance of these issues and to assess the impact of global risks on the predictability of asset returns of a small, open economy. We find that the forecast ability of the best Swiss predictive variable varies over time. This time variation is linked to global foreign currency risks.

Download file now

The file can be downloaded with the button below.

Issue:
14
Pages:
67
JEL classification:
E32, F31, G15, G17
Keywords:
Bond market, business cycle, foreign exchange rate, predictability, risk premium, stock market
Year:
2017

Additional files

Related content

Author(s)

  • David Haab

  • Dr. Thomas Nitschka

Your settings

Required: These cookies (e.g. for storing your IP address) cannot be rejected as they are necessary to ensure the operation of the website. These data are not evaluated further.
Analytics: If you consent to this category, data such as IP address, location, device information, browser version and site visitor behaviour will be collected. These data are evaluated for the SNB's internal purposes and are kept for two years.
Third-party: If you consent to this category, third-party services (used, for example, to add social multimedia content to the SNB's website) will be activated which collect personal data, process these data, disclose them abroad - worldwide - and place cookies. The relevant data protection regulations are linked in the 'Privacy statement for the website of the Swiss National Bank'.

Choose your preferred settings:

This website uses cookies, analytics tools and other technologies to provide requested features, content and services, to personalise the content shown, to provide links to social media, and to analyse the use of the website in anonymised form for the purposes of improving usability. Personal data are also disclosed abroad - worldwide - to video service providers and the analytics tools of these providers are used. More information is available under 'Manage settings'.