Journal
JOURNAL OF FINANCIAL ECONOMICS
Volume 74, Issue 2, Pages 209-235Publisher
ELSEVIER SCIENCE SA
DOI: 10.1016/j.jfineco.2002.11.002
Keywords
predictive regressions; bias; expected returns; equity premium
Categories
Ask authors/readers for more resources
This article studies whether financial ratios like dividend yield can predict aggregate stock returns. Predictive regressions are subject to small-sample biases, but the correction used by prior studies can substantially understate forecasting power. I show that dividend yield predicts market returns during the period 1946-2000, as well as in various subsamples. Book-to-market and the earnings-price ratio predict returns during the shorter sample 1963-2000. The evidence remains strong despite the unusual price run-up in recent years. (C) 2004 Elsevier B.V. All rights reserved.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available