Stock market return predictability: A combination forecast perspective

Wendai Lv and Jipeng Qi

International Review of Financial Analysis, 2022, vol. 84, issue C

Abstract: Based on traditional macroeconomic variables, this paper mainly investigates the predictability of these variables for stock market return. The empirical results show the mean combination forecast model can achieve superior out-of-sample performance than the other forecasting models for forecasting the stock market returns. In addition, the performances of the mean combination forecast model are also robust during different forecasting windows, different market conditions, and multi-step-ahead forecasts. Importantly, the mean combination forecast consistently generates higher CER gains than other models considering different investors' risk aversion coefficients and trading costs. This paper tries to provide more evidence of combination forecast model to predict stock market returns.

Keywords: Stock market; Return predictability; Combination forecast; Business cycles; Portfolio performances (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:84:y:2022:i:c:s105752192200326x

DOI: 10.1016/j.irfa.2022.102376

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