Abstract

http://ssrn.com/abstract=2075
 
 

References (13)



 
 

Citations (27)



 
 

Footnotes (6)



 


 



Earnings Forecasts and the Predictability of Stock Returns:Evidence from Trading the S&P


Athanasios Orphanides


Massachusetts Institute of Technology (MIT) - Sloan School of Management

Joel Lander


Government of the United States of America - Division of Research and Statistics

Martha Douvogiannis


affiliation not provided to SSRN

January 1997

FEDS Discussion Paper No. 97-6

Abstract:     
We develop a simple error-correction model, based on a well known theory espoused by Benjamin Graham and David Dodd, and others, which presumes stock returns tend to restore an equilibrium relationship between the forecasted earnings yield on common stocks and the yield on bonds. The estimation uses I/B/E/S analysts forecasts of S&P earnings. To evaluate the model, we use rolling regressions to obtain out-of-sample forecasts of excess returns. Tests of association show the implicit timing signals to be statistically significant. Further, a strategy of investing in cash when the excess return is forecasted to be negative and in the S&P otherwise outperforms the S&P, yielding higher returns with smaller volatility. Using the bootstrap methodology we demonstrate that the findings are statistically significant.

Number of Pages in PDF File: 25

JEL Classification: G11, G14

working papers series


Download This Paper

Date posted: April 14, 1997  

Suggested Citation

Orphanides, Athanasios and Lander, Joel and Douvogiannis, Martha, Earnings Forecasts and the Predictability of Stock Returns:Evidence from Trading the S&P (January 1997). FEDS Discussion Paper No. 97-6. Available at SSRN: http://ssrn.com/abstract=2075 or http://dx.doi.org/10.2139/ssrn.2075

Contact Information

Athanasios Orphanides (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
77 Massachusetts Ave.
E62-416
Cambridge, MA 02142
United States
HOME PAGE: http://mitsloan.mit.edu/faculty/detail.php?in_spseqno=54058
Joel Lander
Government of the United States of America - Division of Research and Statistics
20th and C Streets, NW
Washington, DC 20551
United States
Martha Douvogiannis
affiliation not provided to SSRN
Feedback to SSRN


Paper statistics
Abstract Views: 4,409
Downloads: 1,207
Download Rank: 8,316
References:  13
Citations:  27
Footnotes:  6

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.375 seconds