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Stock return predictability and determinants of predictability and profits

Deepa Bannigidadmath and Paresh Narayan ()

Emerging Markets Review, 2016, vol. 26, issue C, 153-173

Abstract: We examine stock return predictability for India and find strong evidence of sectoral return predictability over market return predictability. We show that mean-variance investors make statistically significant and economically meaningful profits by tracking financial ratios. For the first time in this literature, we examine the determinants of time-varying predictability and mean-variance profits. We show that both expected and unexpected shocks emanating from most financial ratios explain sectoral return predictability and profits. These are fresh contributions to the understanding of asset pricing.

Keywords: Stock returns; Predictability; Profits; Sectors; Mean-variance; India (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:26:y:2016:i:c:p:153-173

DOI: 10.1016/j.ememar.2015.12.003

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