Extreme Stock Market Performers, Part IV: Can Observable Characteristics Forecast Outcomes?

20 Pages Posted: 22 Jul 2020

Date Written: July 21, 2020

Abstract

Identifying characteristics that can be measured objectively and that successfully predict extreme stock market outcomes is challenging. Nevertheless, the data indicate that some statistically significant patterns existed during the decades from 1960 to 2019. Firms with the highest decade-horizon stock market returns tended to be younger, had larger draw-downs the prior decade, and had higher prior-decade R&D spending, as compared to more typical firms. Firms with the worst decade-horizon stock market returns tended to be more levered at the end of the prior decade, were less profitable and had lower R&D spending during the prior decade, and had more volatile prior-decade stocks returns, as compared to more typical firms.

Keywords: Long Horizon Returns, Return Forecasts, Shareholder Wealth

Suggested Citation

Bessembinder, Hendrik (Hank), Extreme Stock Market Performers, Part IV: Can Observable Characteristics Forecast Outcomes? (July 21, 2020). Available at SSRN: https://ssrn.com/abstract=3657612 or http://dx.doi.org/10.2139/ssrn.3657612

Hendrik (Hank) Bessembinder (Contact Author)

W.P. Carey School of Business ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

HOME PAGE: http://https://wpcarey.asu.edu/people/profile/2717225

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