1 results
Prediction of Stock Returns: A New Way to Look at It
-
- Journal:
- ASTIN Bulletin: The Journal of the IAA / Volume 33 / Issue 2 / November 2003
- Published online by Cambridge University Press:
- 17 April 2015, pp. 399-417
- Print publication:
- November 2003
-
- Article
-
- You have access
- Export citation
-
While the traditional R 2 value is useful to evaluate the quality of a fit, it does not work when it comes to evaluating the predictive power of estimated financial models in finite samples. In this paper we introduce a validated
value useful for prediction. Based on data from the Danish stock market, using this measure we find that the dividend-price ratio has predictive power. The best horizon for prediction seems to be four years. On a one year horizon, we find that while inflation and interest rate do not add to the predictive power of the dividend-price ratio then last years excess stock return does.
value useful for prediction. Based on data from the Danish stock market, using this measure we find that the dividend-price ratio has predictive power. The best horizon for prediction seems to be four years. On a one year horizon, we find that while inflation and interest rate do not add to the predictive power of the dividend-price ratio then last years excess stock return does.