Download or read book On the Predictability of Stock Returns written by Shmuel Kandel (deceased) and published by . This book was released on 2010 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: The predictability of monthly stock returns is investigated from the perspective of a risk-averse investor who uses the data to update initially vague beliefs about the conditional distribution of returns. The optimal stocks-versus-cash allocation of the investor can depend importantly on the current value of a predictive variable, such as dividend yield, even though a null hypothesis of no predictability might not be rejected at conventional significance levels. When viewed in this economic context, the empirical evidence indicates a strong degree of predictability in monthly stock returns.

Download or read book On the Predictability of Stock Returns written by Shmuel Kandel and published by . This book was released on 1995 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: The predictability of monthly stock returns is investigated from the perspective of a risk-averse investor who uses the data to update initially vague beliefs about the conditional distribution of returns. The optimal stocks-versus-cash allocation of the investor can depend importantly on the current value of a predictive variable, such as dividend yield, even though a null hypothesis of no predictability might not be rejected at conventional significance levels. When viewed in this economic context, the empirical evidence indicates a strong degree of predictability in monthly stock returns.

Download or read book On the Predictability of Stock Returns an Asset allocation Perpective written by Shmuel Kandel and published by . This book was released on 1995 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book An Asset Allocation Approach to Measuring Stock Return Predictability written by Walter Boudry and published by . This book was released on 2000 with total page 184 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Empirical Asset Pricing written by Wayne Ferson and published by MIT Press. This book was released on 2019-03-12 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.

Download or read book Strategic Asset Allocation written by John Y. Campbell and published by OUP Oxford. This book was released on 2002-01-03 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.

Download or read book The Predictability of Stock Returns written by Zhong-guo Zhou and published by . This book was released on 1993 with total page 252 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Stock Return Predictability written by Arthur Ritter and published by GRIN Verlag. This book was released on 2015-05-27 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research Paper (postgraduate) from the year 2015 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 17 (1,3), University of St Andrews (School of Management), course: Investment and Portfolio Management, language: English, abstract: Empirical evidence of stock return predictability obtained by financial ratios or macroeconomic factors has received substantial attention and remains a controversial topic to date. This is no surprise given that the existence of return predictability is not only of interest to practitioners but also introduces severe implications for financial models of risk and return. Founded on the assumption of efficient capital markets, research on capital asset pricing models has instigated this emergence of stock return predictability factors. Analysing these factors categorically, this paper will provide a balanced discussion of advocates as well as sceptics of stock return predictability. This essay will commence by firstly outlining the fundamental assumptions of an efficient capital market and its implications for return predictability. Subsequently, a thorough focus will be placed on the most significant predictability factors, including fundamental financial ratios and macroeconomic indicators as well as the validity of sampling methods used to attain return forecasts. Lastly this essay will reflect on the findings while proposing areas of further research.

Download or read book Stock Return Predictability Emerging Market Country Allocation written by Lea Rebecca Cederstrand and published by . This book was released on 2008 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: New financial theory suggests that stock return predictability stems from a counter cyclical variation in expected return. Such findings provide a case for active management. This study investigates how investors might capitalize on predictability through short-term country allocation in emerging equity markets. This type of active management is a sub category of Global Tactical Asset Allocation. The appeal of emerging market equity investment is analyzed from a general and a country allocation perspective. It is found, that there is a high scope for diversification benefits and for profit through active management due to low levels of correlation. As emerging markets develop co-movement increases but alignment with developed markets is curbed by the fact that the latter also move more in tandem over time. As such, benefits can be expected to persist for a while. Successful country allocation relies on good return forecasts. The predictive ability of 8 conditioning variables is studied. It appears that output scaled by prices, dividendprice ratios, and price-earnings ratios are the best predictors of return. Inflation and short term interest rates exhibit some predictive ability and there is weak evidence for mean reversion. However, no predictive ability is found using three and six months momentum. Multivariate prediction models are created and used for country allocation. It is problematic to base the construction of such models on the overall evidence of predictability because there is not sufficient commonality in the factors that drive returns. Country allocation based on general prediction models does not generate a higher return than a market capitalization weighted benchmark. It is concluded, that the best prediction models include different conditioning information for every country. Allocation based on such country specific models offers a higher return than the general approach. However, a market capitalization weighted portfolio is still the better

Download or read book Can Market Timers Time Markets Evidence on the Predictability of Stock Returns from Asset Allocation Funds written by Jacob Boudoukh and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Data on the portfolio weights of asset allocators allows us to address the following two questions: (i) can market timers time markets? and, if so, (ii) can they predict returns over and above predetermined predictive economic variables? A priori, if no evidence of market timing ability can be detected in the portfolio weight changes, further doubt is casted on predictability. Conversely, documenting a link between the shifts in the weights of asset allocators and predetermined variables reinforces the notion of predictability. Moreover, if the information in portfolio weight changes can be shown to subsume the set of predetermined variables commonly used, this could be interpreted as evidence of nonlinearity and/or nonstationarity, better captured by rational learners in the marketplace than by econometricians. The evidence is largely mixed. While many of the point estimates point in the direction of predictability of excess returns, the estimates are most often statistically insignificant. The inference is, hence, critically dependent on one's priors.

Download or read book Three Essays on the Predictability of Stock Returns written by Amit Goyal and published by . This book was released on 2001 with total page 374 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Long Horizon Predictability written by Abraham Lioui and published by . This book was released on 2018 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the effects of asset return predictability at various horizons on an individual's portfolio strategy and welfare gains as measured by a certainty equivalent return rate, for long term investors. We use a method to account for long horizon predictability that does not make violence to the data, and two alternative OLS procedures that allow investors to capture the differential information contained in various period returns. More specifically, our second procedure exploits the information present in the term structure of "forward" equity risk premia. We show that, adopting this procedure, the investor's welfare gain may be substantial relative to that obtained from using short horizon predictability only. Consequently, investors are better off by simultaneously using information in short and long horizon returns.

Download or read book Portfolio Structuring and the Value of Forecasting written by Jacques Lussier and published by CFA Institute Research Foundation. This book was released on 2016-10-10 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Allocation in Chinese Stock Market written by Jian Chen and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: While numerous studies have analyzed the asset allocation issue of US stock market from various angles, much less attention has been paid to the asset allocation issue of Chinese stock market. This article investigates the asset allocation in Chinese stock market from a perspective of incorporating return predictability. We find significant out-of-sample return predictability in Chinese stock market based on a host of return predictors. We then examine the performance of active portfolio strategies such as aggregate market timing strategy, and industry, size, and value rotation strategies to profitably exploit return predictability. We provide strong evidence that these portfolio strategies incorporating return predictability can deliver superior outperformance up to 600 basis points per annum and almost double the Sharpe ratios compared to the passive buy-and-hold benchmarks ignoring return predictability.

Download or read book Predictable Returns and Asset Allocation written by Jessica Wachter and published by . This book was released on 2007 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Are excess returns predictable and if so, what does this mean for investors? Previous literature has tended toward two polar viewpoints: that predictability is useful only if the statistical evidence for it is incontrovertible, or that predictability should affect portfolio choice, even if the evidence is weak according to conventional measures. This paper models an intermediate view: that both data and theory are useful for decision-making. We investigate optimal portfolio choice for an investor who is skeptical about the amount of predictability in the data. Skepticism is modeled as an informative prior over the R2̂ of the predictive regression. We find that the evidence is sufficient to convince even an investor with a highly skeptical prior to vary his portfolio on the basis of the dividend-price ratio and the yield spread. The resulting weights are less volatile and deliver superior out-of-sample performance as compared to the weights implied by an entirely model-based or data-based view.

Download or read book The Predictability of Stock Returns a Nonparametric Approach written by Y. Peter Chung and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reexamines the predictability of stock returns with a nonparametric model. We first identify, through a set of diagnostic tests, five lagged predictive factors from a linear model. Using these factors, we predict one-month- ahead stock index returns with a nonparametric approach. We find that our nonparametric model can correctly predict about 74% of stock index return signs. With various ex ante trading rules based on nonparametric predictions and transaction cost schedules, we then compare the performance of quot;managedquot; portfolios with that of the quot;buy and holdquot; portfolios. We find that the managed portfolios are mean- variance dominant over the buy-and-hold strategies when no or low transaction costs are assumed. When high transaction costs are assumed instead, the mean-variance dominance diminishes. However, the Sharpe index of risk-adjusted portfolio performance indicates that the managed portfolios significantly outperform the buy-and-hold strategies even for the high-transaction cost scenario. We show that the difference in performance between the managed portfolios and the buy-and-hold strategies can be partially explained by the January effect or the small firm effect. In sum, this paper demonstrates the merits of using a nonparametric approach for predicting stock returns and testing market efficiency.

Download or read book Does Stock Return Predictability Imply Improved Asset Allocation and Performance Evidence from the U S Stock Market 1954 2002 written by Puneet Handa and published by . This book was released on 2005 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides evidence on the economic significance of U.S. stock return predictability within an asset allocation framework in a real-time context. We examine the performance of a Bayesian, risk averse investor (the mutual fund investor) who relies on conditioning information (e.g., dividend yield, T-bill yield, default spread and term spread) to forecast future returns, and contrast it with that of an otherwise identical investor who believes that the returns are i.i.d. (the i.i.d. investor). Our major finding is that the relative performance of the mutual fund strategy is unstable over time, being noticeably poor during the most recent sub-period (1989-2002). In marked contrast, the performance of the mutual fund strategy is significantly better when it relies on a model-based approach, characterized by varying degrees of prior confidence in the CAPM.