New model predicts stock market returns better than traditional methods.
The article introduces a new method to study how the risk of investments changes over time. By combining different models, the researchers found a way to estimate the risk of different factors affecting stock prices. They applied this method to various models and discovered that the estimated risk levels can predict future returns on investments. In recent years, these risk estimates have been more accurate at forecasting market returns than other commonly used methods. The study also shows that current bond yields can impact the prices of stocks in the market.
