On the Predictability of Stock Returns: An Asset-Allocation Perspective
41 Pages Posted: 20 Jul 2000 Last revised: 17 Apr 2022
There are 3 versions of this paper
On the Predictability of Stock Returns: An Asset-Allocation Perspective
On the Predictability of Stock Returns: An Asset-Allocation Perspective
Date Written: January 1995
Abstract
The predictability of monthly stock returns is investigated from the perspective of a risk-averse investor who uses the data to update initially vague beliefs about the conditional distribution of returns. The optimal stocks-versus-cash allocation of the investor can depend importantly on the current value of a predictive variable, such as dividend yield, even though a null hypothesis of no predictability might not be rejected at conventional significance levels. When viewed in this economic context, the empirical evidence indicates a strong degree of predictability in monthly stock returns.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Consumption and Portfolio Decisions When Expected Returns are Time Varying
By John Y. Campbell and Luis M. Viceira
-
Who Should Buy Long-Term Bonds?
By John Y. Campbell and Luis M. Viceira
-
Who Should Buy Long-Term Bonds?
By John Y. Campbell and Luis M. Viceira
-
A Multivariate Model of Strategic Asset Allocation
By John Y. Campbell, Yeung Lewis Chan, ...
-
A Multivariate Model of Strategic Asset Allocation
By John Y. Campbell, Yeung Lewis Chan, ...
-
Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets
By George Chacko and Luis M. Viceira
-
Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets
By George Chacko and Luis M. Viceira