On the out-of-sample predictability of stock market returns
Hui Guo ()
No 2002-008, Working Papers from Federal Reserve Bank of St. Louis
In this paper, we provide new evidence of the out-of-sample predictability of stock returns. In particular, we find that the consumption-wealth ratio in conjunction with a measure of aggregate stock market volatility exhibits substantial out-of-sample forecasting power for excess stock market returns. Also, simple trading strategies based on the documented predictability generate returns of higher mean and lower volatility than the buy-and-hold strategy does, and this difference is economically important.
Keywords: Stock; market (search for similar items in EconPapers)
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Published in Journal of Business, March 2006, 79(2), pp. 645-70
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Journal Article: On the Out-of-Sample Predictability of Stock Market Returns (2006)
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