Christian Conrad, Julius Schölkopf and Nikoleta Tushteva

Long-Term Volatility Shapes the Stock Market’s Sensitivity to News

We show that the S&P 500’s instantaneous response to surprises in U.S. macroeconomic announcements depends on the level of long-term stock market volatility. When long-term volatility is high, stock returns are more sensitive to news, and there is a pronounced asymmetry in the response to good and bad news. We explain this by combining the Campbell-Shiller log-linear present value framework with a two-component volatility model for the conditional variance of cash flow news and allowing for volatility feedback. In our model, innovations to the long-term volatility component are the most important driver of discount rate news. Large announcement surprises lead to upward revisions in future required returns, which dampens/amplifies the effect of good/bad news.

Frank Brückbauer, Christian Conrad, Julius Schölkopf and Michael Weber

Inflation Narratives and Stock Market Expectations

Abstract will follow. 

Christian Conrad, Zeno Enders, Julius Schölkopf

Heterogeneous Expectation Formation. Evidence from International Forecasts

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