Table 7. Information of term spread and...

Table 7.

Information of term spread and its components with uncertainty in US stock market

Horizon	Const	D_{U_E}	US_TS	US_TS × D_{U_E}	Adj. R²	Horizon	Const	D_{U_E}	US_TS	US_TS × D_{U_E}	Adj. R²
Panel A: Term spread
n = 1	0.0075**		−0.0026		−0.0039	n = 6	0.0348**		−0.0018		−0.0056
	(2.284)		(−0.673)		−0.0039		(1.950)		(−0.171)		−0.0056
	0.0026	0.0131	−0.0030	−0.0026	0.0031		0.0238	0.0346	−0.0093	0.0070	0.0254
	(0.749)	(1.499)	(−0.889)	(−0.269)	0.0031		(1.304)	(1.160)	(−0.848)	(0.419)	0.0254
n = 3	0.0209**		−0.0031		−0.0038	n = 12	0.0306		0.0178		0.0086
	(2.132)		(−0.427)		−0.0038		(0.755)		(1.138)		0.0086
	0.0129	0.0268	−0.0024	−0.0065	−0.0041		0.0184	0.0373	0.0057	0.0149	0.0385
	(1.352)	(1.238)	(−0.446)	(−0.517)	−0.0041		(0.426)	(0.694)	(0.311)	(0.621)	0.0385

Horizon	Const	D_{U_E}	US_TS	US_TS × D_{U_E}	Adj. R²	Horizon	Const	D_{U_E}	US_TS	US_TS × D_{U_E}	Adj. R²
Panel A: Term spread
n = 1	0.0075**		−0.0026		−0.0039	n = 6	0.0348**		−0.0018		−0.0056
	(2.284)		(−0.673)		−0.0039		(1.950)		(−0.171)		−0.0056
	0.0026	0.0131	−0.0030	−0.0026	0.0031		0.0238	0.0346	−0.0093	0.0070	0.0254
	(0.749)	(1.499)	(−0.889)	(−0.269)	0.0031		(1.304)	(1.160)	(−0.848)	(0.419)	0.0254
n = 3	0.0209**		−0.0031		−0.0038	n = 12	0.0306		0.0178		0.0086
	(2.132)		(−0.427)		−0.0038		(0.755)		(1.138)		0.0086
	0.0129	0.0268	−0.0024	−0.0065	−0.0041		0.0184	0.0373	0.0057	0.0149	0.0385
	(1.352)	(1.238)	(−0.446)	(−0.517)	−0.0041		(0.426)	(0.694)	(0.311)	(0.621)	0.0385

Horizon	Const	D_{U_E}	US_TP	US_TP × D_{U_E}	US_RN	US_RN × D_{U_E}	Adj. R²	Horizon	Const	D_{U_E}	US_TP	US_TP × D_{U_E}	US_RN	US_RN × D_{U_E}	Adj-R²
Panel B: Term premium and risk-neutral expectation
n = 1	0.0109***		−0.0071				0.0119	n = 6	0.0511***		−0.0237				0.0169
	(4.104)		(−1.299)				0.0119		(4.808)		(−1.236)				0.0169
	−4.31 × 10⁻⁵	0.0200***	2.07 × 10⁻⁴	−0.0121			0.0296		0.0318**	0.0409**	−0.0278	0.0052			0.0452
	(−0.010)	(3.172)	(0.046)	(−1.551)			0.0296		(2.170)	(2.468)	(−1.132)	(0.227)			0.0452
	0.0012				0.0040		−0.0016		0.0064				0.0261		0.0149
	(0.223)				(1.073)		−0.0016		(0.233)				(1.404)		0.0149
	0.0034	−0.0435*			−0.0044	0.0462**	0.0521		0.0128	−0.1432**			−0.0045	0.1580***	0.0986
	(1.062)	(−1.789)			(−1.325)	(2.467)	0.0521		(0.579)	(−2.340)			(−0.289)	(2.868)	0.0986
	0.0057		−0.0088		0.0069		0.0175		0.0230		−0.0325		0.036*		0.0488
	(1.357)		(−1.550)		(1.645)		0.0175		(1.045)		(−1.631)		(1.854)		0.0488
	0.0015	−0.0330	0.0037	−0.0163**	−0.0059	0.0493***	0.0775		0.029*	−0.1429**	−0.0327	0.0074	0.0083	0.1486***	0.1171
	(0.409)	(−1.602)	(0.698)	(−2.267)	(−1.524)	(2.881)	0.0775		(1.712)	(−2.504)	(−1.193)	(0.285)	(0.472)	(3.329)	0.1171
n = 3	0.0288***		−0.0164				0.0205	n = 12	0.079***		−0.0211				0.0032
	(4.367)		(−1.180)				0.0205		(3.624)		(−0.778)				0.0032
	0.014*	0.0256**	−0.0070	−0.0154			0.0224		0.051*	0.0617*	−0.0297	0.0118			0.0422
	(1.891)	(2.293)	(−0.637)	(−1.034)			0.0224		(1.735)	(1.865)	(−0.776)	(0.347)			0.0422
	0.0032				0.0126		0.0060		−0.0157				0.0808*		0.0947
	(0.208)				(1.192)		0.0060		(−0.273)				(1.959)		0.0947
	0.0102	−0.1002*			−0.0013	0.0943**	0.0591		0.0025	−0.2930***			0.0336	0.2900***	0.2191
	(0.975)	(−1.735)			(−0.152)	(2.043)	0.0591		(0.053)	(−2.827)			(1.020)	(3.328)	0.2191
	0.0140		−0.0210		0.019*		0.0406		0.0068		−0.0440		0.0949**		0.1261
	(1.155)		(−1.457)		(1.667)		0.0406		(0.140)		(−1.456)		(2.115)		0.1261
	0.0144	−0.0881*	−0.0081	−0.0160	0.0019	0.0944**	0.0860		0.0357	−0.3102***	−0.0644	0.0408	0.0588	0.2680***	0.2421
	(1.583)	(−1.805)	(−0.654)	(−1.120)	(0.205)	(2.342)	0.0860		(0.948)	(−2.854)	(−1.376)	(0.903)	(1.425)	(3.470)	0.2421

Notes: The table reports estimates from predictive regressions of US stock market returns on term spread and its components with dummy variables of US EPU. All variable definitions are identical to those in Table 3, except for D_U_{_}_E. D_U_{_}_E is the dummy variable for high uncertainty periods. Horizon indicates predictive months of future stock market returns. Panels A and B report the results of term spread and its components, respectively. Newey and West (1987) corrected t-statistics are reported in parentheses. *, ** and *** represent significance at the 10, 5 and 1% levels, respectively

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