منابع مشابه
Elusive Return Predictability∗
Investors’ search for successful forecasting models leads the data generating process for financial returns to change over time which means that individual return forecasting models can at best hope to uncover evidence of ‘local’ predictability. We illustrate this point on a suite of forecasting models used to predict US stock returns and propose an adaptive forecast combination approach. Most ...
متن کاملBreaks in Return Predictability
We propose a new approach to forecasting stock returns in the presence of structural breaks that simultaneously affect the parameters of multiple portfolios. Exploiting information in the cross-section increases our ability to identify breaks in return prediction models and enables us to detect breaks more rapidly in real time, thereby allowing the parameters of the predictive return regression...
متن کاملState-Switching Return Predictability
Return predictability may be hidden from view if the same information has different meanings at different times, especially if information is good news in one state but bad news in another. We illustrate, using price changes in industrial metals, how conclusions on stock market return predictability vary with the number of expansions and contractions in our sample. We also show how state-switch...
متن کاملReconciling the Return Predictability Evidence
Evidence of stock-return predictability by financial ratios is still controversial, as documented by inconsistent results for in-sample and out-of-sample regressions and by substantial parameter instability. This article shows that these seemingly incompatible results can be reconciled if the assumption of a fixed steady state mean of the economy is relaxed. We find strong empirical evidence in...
متن کاملUpper Bounds on Return Predictability
This paper investigates whether the degree of predictability can be explained by existing asset pricing models, and provides two theoretical upper bounds on the R-square of the regression of stock returns on predictors for given classes of models of interest. Empirically, we find that the predictive R-square is significantly larger than the upper bounds permitted by well known asset pricing mod...
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ژورنال
عنوان ژورنال: The Review of Financial Studies
سال: 2021
ISSN: 0893-9454,1465-7368
DOI: 10.1093/rfs/hhab067