Forecasting stock returns with sum-of-the-parts methodology: international evidence

Mahtab Athari (), Atsuyuki Naka () and Abdullah Noman ()
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Mahtab Athari: Concord University
Atsuyuki Naka: University of New Orleans
Abdullah Noman: University of North Carolina at Pembroke

Journal of Asset Management, 2025, vol. 26, issue 1, No 7, 114 pages

Abstract: Abstract This study applies and extends the sum-of-the-parts (SOP) method for forecasting stock returns by proposing an adjusted SOP (ASOP) and assessing its performance across 32 developed and emerging markets. It provides a comprehensive evaluation of the SOP methodology’s effectiveness across various markets. It shows ASOP’s improved forecasting accuracy and economic gains for investors, outperforming in 28 countries. This research contributes to the forecasting literature by highlighting ASOP’s effectiveness and practicality with financial and market data. Despite varying performance across markets, the findings suggest ASOP’s potential as a tool for financial analysts and portfolio managers, offering avenues for further research on its applicability in different financial environments.

Keywords: Stock return forecasting; Sum of the parts; Out-of-sample performance; Trading strategies; Developed markets; Emerging markets (search for similar items in EconPapers)
JEL-codes: G11 G12 G17 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1057/s41260-024-00380-1

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