Welcome! I'm Beata Gafka. 

We develop an approach to determine whether a particular predictor represents a proxy for fundamental risk. We build on the assumption that risk-based predictors should be linked to new information about economic conditions. We show that most predictors forecast returns on either days with macroeconomic announcements or the remaining days, indicating that sources of return predictability differ across predictors: few are driven by fundamental risk; most have other origins. We show that Shiller’s excess volatility is confined to non-announcement days, suggesting that the ability to forecast stock market’s noise component underlies much of the predictability documented in the literature. 

The Brexit referendum disrupted global trade, with profound implications for financial markets. This paper examines the impact of Brexit-induced trade uncertainty on stock market performance across the UK and the EU. Stock price reactions suggest that the economic harm was more severe and prolonged for the UK than for the EU. Between 2016 and 2019, the UK factor underperformed the EU-14 by 20 percentage points. The Brexit premium explains up to 70% of this underperformance. Brexit-related shocks influenced stock returns beyond the referendum. These findings underscore the long-term consequences of political uncertainty and trade disintegration on asset prices and performance.  

We study the relationship between aggregate money balances and subsequent stock and bond returns. We find that levels of broad money multipliers (the ratios of broad money to narrow money) forecast future returns with a negative sign, while changes in these multipliers forecast returns with a positive sign. These findings indicate that levels of multipliers are pro-cyclical: they tend to be high at times of low expected returns. The money multipliers’ dynamics indicates changes in the volume of financial intermediation and the level of net leverage, consistent with credit-cycle theories of macroeconomic fluctuations.