The nature of the relation between stock returns and the three monetary variables of interest rates (bond yields), inflation and money supply growth, while oft studied, is one that remains unclear. We argue that the nature of the relation changes over time, and this variation is largely driven...

This paper considers whether the cyclical component of the log dividend-price and price-earnings ratios contain forecast power for stock returns. While the levels of these series contain slow moving information for predicting long horizon returns, for short-horizon returns it is the relative...

This paper considers whether the log dividend yield provides forecast power for stock returns. While this is an oft-researched topic there is no consensus answer and yet it remains crucial in our understanding of asset pricing. Using a five-year rolling window we compare forecasts from the...

This paper argues that the nature of stock return predictability varies with the level of inflation. We contend that the nature of relations between economic variables and returns differs according to the level of inflation, due to different economic risk implications. An increase in low level...

Changes in stock returns arise from changes in expected future cash flow growth and expected future discount rates. However, which variables proxy for those changes remains unknown. This paper considers twenty-five variables that are arranged into five groups and examines both in-sample...

This paper examines the relationship between stock prices and commodity prices and whether this can be used to forecast stock returns. As both prices are linked to expected future economic performance they should exhibit a long-run relationship. Moreover, changes in sentiment towards commodity...

Research examining the usefulness of non-linear models for stock market returns has almost reached an impasse. While there is general recognition of the superior ability of non-linear models to describe the data, there is less certainty about their ability to forecast the data. As such simple...

Using a simple and well-established model for predictive power this letter assess how much in-sample data is required to obtain good out-of-sample forecasts. Specifically using the present value predictive model for monthly stock returns we conduct a backward recursive exercise where the...

Using data for forty markets, this paper examines the nature and possible causes of time-variation within the stock return-dividend yield predictive regression. The results in this paper show that there is significant time-variation in the predictive equation for returns and that such variation...

Movements in the stock market should reflect expectations regarding future economic conditions and lead the macroeconomy. However, evidence for stock returns providing such predictive power is mixed. We argue this arises as stock returns are noisy and consider the predictive ability of derived...