This paper explore whether market anomalies can predict economic growth and other
macroeconomic factors using the time-varying volatility methodology. The findings indicate
that risk premia have different and significant relationship with different macroeconomic
factors in the U.S market. The findings of using different univariate and multivariate
specification of Ordinary Least Squares and TARCH models suggest that momentum can
predict economic growth while there is no evidence that value premium, size premium or
momentum can do. However there is strong evidence that the liquidity crisis can predict
the economic growth.
JEL Codes: G01, G12, G14
Key Words: Value Premium; Size Premium; Momentum; Default Risk; Term Premium;
Financial Crises; Economic Growth.
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