We use machine learning tools to analyze industry return predictability based on theinformation in lagged industry returns from across the entire economy. Controlling forpost-selection inference and multiple testing, we nd significant in-sample evidence ofindustry return predictability. Lagged...

We apply a reduced-rank approach to reduce a large number of observable factors to a few parsimonious ones. Out of 70 factor proxies, we find that the best five combinations seem adequate and outperform the Fama-French (2015) five factors for pricing industry portfolios as expected. However,...

Time series momentum (TSM) refers to the predictability of the past 12-month return on the next one-month return and is the focus of several recent influential studies. This paper shows that asset-by-asset time series regressions reveal little evidence of TSM, both in- and out-of-sample. While...

We find a pricing error profitability pattern for well-known asset pricing models: the CAPM, Fama-French, Hou-Xue-Zhang, Stambaugh-Yuan, and Daniel-Hirshleifer-Sun. A trading strategy that buys low pricing error stocks and sells high pricing error ones earns significant average and risk-adjusted...

In this paper, we analyze the usefulness of technical analysis, specifically the widely used moving average trading rule, from an asset allocation perspective. We show that when stock returns are predictable, technical analysis adds value to commonly used allocation rules that invest fixed...

Technical analysis is the study for forecasting future asset prices with past data. In this survey, we review and extend studies on not only the time-series predictive power of technical indicators on the aggregated stock market and various portfolios, but also the cross-sectional predictability...

The market risk premium is central in finance, and has been analyzed by numerous studies in the time-series predictability literature and by growing studies in the options literature. In this paper, we provide a novel link between the two literatures. Theoretically, we derive a lower bound on...

We study how equity option trading affects the market risk premium. We find that a measure of aggregate call order imbalance (ACIB), defined as the cross-sectional average of the difference between open-buy and open-sell volume, negatively forecasts future stock market returns significantly from...

Recent empirical studies suggest that demand and supply factors have important effects on bond yields. Both market segmentation and preferred habitat hypothesis are used to explain these demand and supply effects. In this paper, we use an affine preferred-habitat term structure model and the...

Recent empirical studies suggest that demand and supply factors have important effects on bond yields. Both market segmentation and preferred habitat hypothesis are used to explain these demand and supply effects. In this paper, we use an affine preferred-habitat term structure model and the...