Forecasting Stock Price Changes: Is it Possible?
31 Pages Posted: 17 Jul 2006
Date Written: June 2006
We examine the relation between monthly stock returns and lagged publicly available information. Our primary objective is to determine whether the variables proposed in the literature to predict the equity premium contain incremental information to an investor. We find that certain variables do provide incremental information and may have some practical value. Although this not necessarily imply that return-forecasting models may be used to predict future stock returns, some model specifications may be used to predict future stock movements.
Keywords: Stock return predictability, stock movement predictability
JEL Classification: G12, G14
Suggested Citation: Suggested Citation