We assess financial theory-based and machine learning-implied measurements of stock risk premia by comparing the quality of their return forecasts. In the low signal-to-noise environment of a one month horizon, we find that it is preferable to rely on a theory-based approach instead of engaging...

Predicting the stock price has always been a topic of great interest to both investors and researchers. Machine learning algorithms combined with massive volumes of financial data have proven to be useful tools for stock prediction. However, as the efficient market hypothesis says, market cannot...