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Working Paper 2002-008C

"On the Out-of-Sample Predictability of Stock Market Returns"
by Hui Guo

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.

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Category > Finance
Author > Hui Guo
Research Papers and Publications: JEL Code > G1