We investigate the prediction of excess returns and fundamentals by financial ratios – dividend-price ratio, earnings-price ratio, and book-to-market ratio – by decomposing financial ratios into a cyclical component and a stochastic trend component. We find both components predict excess...

Literature Review -- Return Predictability and the Real Economy -- Study Design and Data -- Empirical Part I - Testing for Predictability -- Forecasting Models -- Empirical Part II - Investment Strategies -- Conclusion