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School of Business and Management

Research Seminar Series: Return Decomposition over the Business Cycle

24 September 2014

Time: 1:00 - 2:00pm
Venue: Mile End Campus, Bancroft Building, Room 4.04/04

Speaker name & affiliation

Tolga Cenesizoglu, HEC Montreal

Seminar title

Return Decomposition over the Business Cycle


To analyze the determinants of the observed variation in stock prices, Campbell and Shiller (1988) suggest decomposing stock returns into unexpected changes in investors’ beliefs about future cash flows and discount rates. Based on a generalization of this approach to a regime-switching framework, we analyze the conditional variance decomposition of the market return over the business cycle. We find that discount rate news is more important than cash flow news in determining the conditional variance of the market return in recessions while the opposite holds in expansions.

We show that this empirical finding can be explained by a stylized asset pricing model with regime-switching fundamentals.


13:00 - 14:00pm

Lunch will be provided in the 4th floor kitchen from 12.30pm. 

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