The complementary role of cross-sectional and time-series information in forecasting stock returns

Qing Zhou and Robert Faff
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Qing Zhou: UQ Business School, The University of Queensland, Australia; School of Management, Xi’an Jiaotong University, China

Australian Journal of Management, 2017, vol. 42, issue 1, 113-139

Abstract: While linear time-series models, technical analysis, and momentum models all extract information from past market data, they each interpret data differently. We test the informative role of three representative models and examine the trading performance of a combined forecasting model at the individual stock level. Our results indicate that these models all contain marginal information and complement each other. The combined trading model captures higher upward trending returns and provides the same downward trending returns compared with the buy-and-hold strategy.

Keywords: Combination; complementarity; forecasting; out-of-sample; stock returns (search for similar items in EconPapers)
JEL-codes: C53 C58 G11 G12 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:42:y:2017:i:1:p:113-139

DOI: 10.1177/0312896215575888

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