On the Predictability of Stock Returns: An Asset-Allocation Perspective.
Sample evidence about the predictability of monthly stock returns is considered from the perspective of a risk-averse Bayesian investor who must allocate funds between stocks and cash. The investor uses the sample evidence to update prior beliefs about the parameters in a regression of stock returns on a set of predictive variables. The regression relation can seem weak when described by usual statistical measures but the current values of the predictive variables can exert a substantial influence on the investor's portfolio decision, even when the investor's prior beliefs are weighted against predictability. Copyright 1996 by American Finance Association.
Year of publication: |
1996
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Authors: | Kandel, Shmuel ; Stambaugh, Robert F |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 51.1996, 2, p. 385-424
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Publisher: |
American Finance Association - AFA |
Saved in:
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