Value Factors Do Not Forecast Returns for S&P 500 Stocks

38 Pages Posted: 12 Mar 2014

See all articles by Ian Kaplan

Ian Kaplan

Bear Products International

Date Written: March 10, 2014

Abstract

This paper investigates how effectively value factors can forecast future returns for stocks in the S&P 500.

Ranked portfolios and linear models are constructed from a set of quarterly value factor from 1998 to 2013. Portfolios are drawn from the quarterly S&P 500 stock universe to avoid survivor bias.

Over this time period, with a set of over 400 or more stocks per quarter, the returns from ranked portfolios or forecast by linear models produce at best weak performance compared to the S&P 500 index returns.

These results suggest that for this fifteen year time period, for the large capitalization S&P 500 stocks, the value factors examined here are not useful for constructing portfolios.

Keywords: Portfolio construction, value investing, linear models

JEL Classification: C31, C32, G11

Suggested Citation

Kaplan, Ian, Value Factors Do Not Forecast Returns for S&P 500 Stocks (March 10, 2014). Available at SSRN: https://ssrn.com/abstract=2407303 or http://dx.doi.org/10.2139/ssrn.2407303

Ian Kaplan (Contact Author)

Bear Products International ( email )

CA
United States

HOME PAGE: http://www.bearcave.com

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