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Fig. 6 | Swiss Journal of Economics and Statistics

Fig. 6

From: The Swiss franc safety premium

Fig. 6

(a-d) Predicted conditional covariance—subsamples. 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 zero stage regressions are estimated for each subsample separately. The first subsample (January 1990 to December 1998) consists of 107 observations and the second subsample (January 1999 to August 2011) consists of 152 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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