The Power of T-1 Returns

Posted: 29 Jul 2014  

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: July 27, 2014

Abstract

This study analyzes stock market performance in 70 countries to determine if return in month T-1 is useful for forecasting return in the current month. The analysis of full sample shows that the average return in each of the preceding months is useful for forecasting return in the respective following month across 70 equity markets except April. In the developed stock markets, only the average returns in Feb, Mar, May, Aug, Oct and Nov are usefully for forecasting their respective following months. Across the emerging stock markets, only the average returns in May and June which are not useful for forecasting returns in their respective following months. In the case of frontier stock markets, only returns in Feb, Mar, May, Jun and Jul have predictive power over returns in the following respective months. Finally, returns in Feb and Mar have a powerful predicting power regardless whether the stock markets are developed, emerging or frontier ones.

Keywords: market efficiency, stock market performance, forecasting

JEL Classification: G10, G11, G15

Suggested Citation

Sum, Vichet, The Power of T-1 Returns (July 27, 2014). Available at SSRN: https://ssrn.com/abstract=2472679

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

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