Forecasting stock market returns: The sum of the parts is more than the whole

• 成果类型: Article
• 署名作者: Ferreira, Miguel A.; Santa-Clara, Pedro
• 署名单位: Universidade Nova de Lisboa; European Corporate Governance Institute; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2011.02.003
• 发表日期: 2011
• 页码: 514-537
• 关键词: Predictability; stock returns; equity premium; PREDICTIVE REGRESSIONS; trading strategies

摘要

We propose forecasting separately the three components of stock market returns the dividend-price ratio, earnings growth, and price-earnings ratio growth the sum-of-the-parts (SOP) method. Our method exploits the different time series persistence of the components and obtains out-of-sample R-squares (compared with the historical mean) of more than 1.3% with monthly data and 13.4% with yearly data. This compares with typically negative R-squares obtained in a similar experiment with predictive regressions. The performance of the SOP method comes mainly from the dividend-price ratio and earnings growth components, and the robustness of the method is due to its low estimation error. An investor who timed the market using our method would have had a Sharpe ratio gain of 0.3. (C) 2011 Elsevier B.V. All rights reserved.