We examined the relations of various market multiples with subsequent annual returns for portfolios of liquid U.S. stocks. In univariate regressions, price/sales (P/S) has the most consistently significant negative relation and highest explanatory power. Multivariate regression models,...

This study assesses the usefulness of flexible optimal models of business cycle variables for predicting stock market returns. We find that variable estimation periods identify structural breaks in months with large absolute returns and the optimal models recognize regime switches. Flexible...