We propose forecasting separately the three components of stock market returns: the dividend-price ratio, earnings growth, and price-earnings ratio growth - the sum-of-the-parts (SOP) method. Our method exploits the different time-series persistence of the components and obtains out-of-sample...

We propose forecasting separately the three components of stock market returns: dividend yield, earnings growth, and price-earnings ratio growth. We obtain out-of-sample R-square coefficients (relative to the historical mean) of nearly 1.6% with monthly data and 16.7% with yearly data using the...

We propose forecasting separately the three components of stock market returns: dividend yield, earnings growth, and price-earnings ratio growth. We obtain out-of-sample R-square coefficients (relative to the historical mean) of nearly 1.6% with monthly data and 16.7% with yearly data using the...