The Predictability of Aggregate Stock Market Returns: Evidence Based on Glamour Stocks

Venkat Eleswarapu

The Journal of Business, 2004, vol. 77, issue 2, 275-294

Abstract: We find that annual excess returns on the stock market index are negatively related to the returns of glamour stocks in the previous 36-month period. In contrast, neither returns of value stocks nor aggregate stock market returns, purged of glamour stock effects, have any predictive power. In addition, the excess returns on the aggregate market are negatively skewed when the prior returns of glamour stocks are high. Finally, the inclusion of term premium, default premium, aggregate dividend yield, and the consumption-to-wealth ratio (CAY) as control variables do not materially alter the predictive power of prior glamour stock returns.

Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:77:y:2004:i:2:p:275-294

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