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Fig. 5 | Swiss Journal of Economics and Statistics

Fig. 5

From: The Swiss franc safety premium

Fig. 5

(a-c) Predicted conditional covariance—full sample. Notes: The estimates of the conditional covariance correspond to the fitted value of the first stage regression: \( \widehat {Cov_{t}} \left (r_{t+1}^{\omega }, \triangle e_{t+1} \right) = \hat {\alpha }_{Z} Z_{t}\) (see Eq. (9)). In this first stage regression, the ex-post covariance obtained from the zero stage regressions is regressed on a set of instruments. The set of instruments Z t consists of a constant, the dividend-price ratio, the lagged equity return, plus a measure for the lagged equity return variance, exchange rate return variance, and their covariance. The first-stage regression is estimated using the full sample, which consists of 259 observations. The two thin lines represent the 95% confidence band and are based on a two sided t-statistic with Newey-West estimates of the standard errors

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