I am very grateful for comments received from Mark Freeman (the referee) and the editors as well as from Erik Theissen and conference and seminar participants in Hamburg (German Finance Association), Hannover (Leibniz University), and Rome (IFABS).
TOWER BUILDING AND STOCK MARKET RETURNS
Version of Record online: 8 SEP 2013
© 2013 The Southern Finance Association and the Southwestern Finance Association
Journal of Financial Research
Volume 36, Issue 3, pages 413–434, Fall 2013
How to Cite
Löffler, G. (2013), TOWER BUILDING AND STOCK MARKET RETURNS. Journal of Financial Research, 36: 413–434. doi: 10.1111/j.1475-6803.2013.12017.x
- Issue online: 8 SEP 2013
- Version of Record online: 8 SEP 2013
Construction starts of skyscrapers predict subsequent U.S. stock returns. The predictive ability exceeds that of alternatives such as the prevailing historical mean, predictions based on dividend ratios, and recently suggested combination forecasts. One explanation for these patterns is that tower building is indicative of overoptimism; alternatively, tower building could help identify periods of low risk premia. I present indirect evidence that is consistent with both explanations.