We compare several representative sophisticated model averaging and variable selection techniques of forecasting stock returns. When estimated traditionally, our results confirm that the simple combination of individual predictors is superior. However, sophisticated models improve dramatically...

This paper investigates the predictive ability of international volatility risk for the daily aggregate Chinese stock market returns. We employ the innovations in implied volatility indices of seven major international markets as our international volatility risk proxies. We find that...

Our study tries to explore whether the financial strength proxied by F-score can predict the returns in Chinese stock market and its economic explanations. Results show that the financially stronger firms can generate higher expected raw returns and abnormal returns in Fama-French five-factor...

This paper investigates the effects of U.S. economic variables on the time variation of Chinese stock market volatility. We find that several U.S. economic variables such as the dividend price ratio, dividend yield and industrial production strongly forecast the future monthly volatilities of...

This paper constructs a manager sentiment index based on the aggregated textual tone of corporate financial disclosures. We find that manager sentiment is a strong negative predictor of future aggregate stock market returns, with monthly in-sample and out-of-sample R2 of 9.75% and 8.38%,...

This paper investigates whether rational risk or behavioral mispricing helps to explain the profitability premium in the Chinese stock market setting. We find that firms with high profitability generate substantially higher future stock returns than those with low profitability in China. This...

Markowitz's mean-variance portfolio optimization is either inefficient or impossible when the number of assets becomes relatively large. To overcome this difficulty, we propose several component-wise boosting learning methods that, in a linear regression specification, can iteratively select the...

In this paper, we propose a fundamental timing strategy in both U.S. and Chinese stock market to trade the fundamental sorted portfolios such as value and profitability portfolios in the time series dimension. We find that fundamental timing strategies based on moving average (MA) timing signals...