Understanding stock return predictability
By: by Hui Guo and Robert Savickas
Contributors: Savickas, Robert; Federal Reserve Bank of St. Louis
Series: Working paper -- 2006-019A; Working paper (Federal Reserve Bank of St. Louis : Online) -- 2006-019A.
Publisher: Federal Reserve Bank of St. Louis
Published: 2006
Place of publication: St. Louis, Mo.]
Language: eng
Format: [electronic resource] /
Description: "Finance theory, e.g., Campbell's (1993) ICAPM, indicates that the expected equity premium is a linear function of stock market volatility and the volatility of shocks to investment opportunities.  We show that one can use average CAPM-based idiosyncratic volatility as a proxy for the latter.  In particular, over the period 1927:Q1 to 2005:Q4, stock market volatility and idiosyncratic volatility jointly forecast stock market returns both in sample and out of sample.  This finding is robust to alternative measures of idiosyncratic volatility; subsamples; the log transformation of volatility measures; and control for various predictive variables commonly used by early authors.  Our results suggest that stock market returns are predictable"--Federal Reserve Bank of St. Louis web site.
Notes: Title from PDF file as viewed on 6/26/2006.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.