This paper examines return predictability of the U.S. stock market using portfolios sorted by size, book-to-market ratio, and industry. A novel panel variance ratio test is proposed and employed to evaluate time-varying return predictability from 1964 to 2011. It is found that the stock returns...

We evaluate the empirical validity of popular asset-pricing models in explicit consideration of statistical power, by employing the adaptive significance level and equal-probability test. Past studies often use samples from a large cross-section of portfolios over a long time period, conducting...

We study how market sentiment is dynamically related to a range of risk premia in the short-run, using three measures of sentiment (the implied volatility index, investment advisor sentiment, and individual investor sentiment) and four factor premia (market, size, value, and momentum) for the...

We study return predictability of the Dow Jones Industrial Average indices from 1900 to 2009. We find strong evidence that time-varying return predictability is driven by changing market conditions, consistent with the implications of the adaptive markets hypothesis. During market crashes, no...