The predictive ability of the dividend-price ratio for future stock returns does not necessarily imply that dividend-price ratios predict future stock prices. Stock returns consist of both a capital gain and a dividend yield component, and we show that predictability of stock returns by lagged...

The output gap, a production-based macroeconomic variable, is a strong predictor of U.S. stock returns. It is a prime business cycle indicator that does not include the level of market prices, thus removing any suspicion that returns are forecastable due to a “fad” in prices being washed...

This paper introduces a novel consumption-based variable, cyclical consumption, and examines its predictive properties for stock returns. Future expected stock returns are high (low) when aggregate consumption falls (rises) relative to its trend and marginal utility from current consumption is...

Rapach, Ringgenberg and Zhou (2016) claim that for the sample period 1973 to 2014 "short interest is arguably the strongest known predictor of aggregate stock returns", that it "outperforms a host of popular predictors", and that it represents "informed traders who are able to anticipate changes...