Predicting The Distribution Of Stock Returns
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Predicting The Distribution Of Stock Returns
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Author : Daniele Massacci
language : en
Publisher:
Release Date : 2017
Predicting The Distribution Of Stock Returns written by Daniele Massacci and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
A large literature has investigated predictability of the conditional mean of low frequency stock returns by macroeconomic and financial variables; however, little is known about predictability of the conditional distribution. We look at one-step-ahead out-of-sample predictability of the conditional distribution of monthly U.S. stock returns in relation to the macroeconomic and financial environment. Our methodological approach is innovative: we consider several specifications for the conditional density and combinations schemes. Our results are as follows: the entire density is predicted under combination schemes as applied to univariate GARCH models with Gaussian innovations; the Bayesian winner in relation to GARCH - skewed - t models is informative about the 5% VaR; the average realised utility of a mean-variance investor is maximised under the Bayesian winner as applied to GARCH models with symmetric student-t innovations. Our results have two implications: the best prediction model depends on the evaluation criterion; and combination schemes outperform individual models.
Is The Distribution Of Stock Returns Predictable
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Author : Tolga Cenesizoglu
language : en
Publisher:
Release Date : 2014
Is The Distribution Of Stock Returns Predictable written by Tolga Cenesizoglu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
A large literature has considered predictability of the mean or volatility of stock returns but little is known about whether the distribution of stock returns more generally is predictable. We explore this issue in a quantile regression framework and consider whether a range of economic state variables are helpful in predicting different quantiles of stock returns representing left tails, right tails or shoulders of the return distribution. Many variables are found to have an asymmetric effect on the return distribution, affecting lower, central and upper quantiles very differently. Out-of-sample forecasts suggest that upper quantiles of the return distribution can be predicted by means of economic state variables although the center of the return distribution is more difficult to predict. Economic gains from utilizing information in time-varying quantile forecasts are demonstrated through portfolio selection and option trading experiments.
Predicting Firm Level Stock Returns
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Author : David G. McMillan
language : en
Publisher:
Release Date : 2017
Predicting Firm Level Stock Returns written by David G. McMillan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
This paper examines the predictive ability of several stock price ratios, stock return dispersion and distribution for individual firm level stock returns. Analysis typically focusses on market level returns, however, for the asset pricing model that underlies predictability to hold, firm-level predictability should also be present. In addition, we examine the economic content of predictability by considering whether the predictive coefficient has the theoretically correct sign and whether it is related to future output growth. Movement in stock returns should reflect investor expectations regarding future economic conditions. While stock returns are often too noisy to act as predictors for future economic behaviour, factors that predict stock returns should equally have predictive power for output growth. In our analysis, we use the time-varying predictive coefficient to predict output growth, as the coefficient reflects the sensitivity of stock returns to the predictor variable and thus can be regarded as investors' confidence in the predictive relation. The results suggest that several stock price ratios have predictive power for individual firm stock returns, exhibit the correct coefficient sign and has predictive power for output growth. Each of these ratios has a measure of fundamentals dividend by the stock price and has a positive predictive relation with stock returns and output growth. This implies that as investors expect future economic conditions to improve and earnings and dividends to rise, so expected stock returns will increase. This supports the stock return predictive relation that arises through the cash flow channel.
On The Predictability Of Stock Returns
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Author : Shmuel Kandel
language : en
Publisher:
Release Date : 1995
On The Predictability Of Stock Returns written by Shmuel Kandel and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Asset allocation categories.
The predictability of monthly stock returns is investigated from the perspective of a risk-averse investor who uses the data to update initially vague beliefs about the conditional distribution of returns. The optimal stocks-versus-cash allocation of the investor can depend importantly on the current value of a predictive variable, such as dividend yield, even though a null hypothesis of no predictability might not be rejected at conventional significance levels. When viewed in this economic context, the empirical evidence indicates a strong degree of predictability in monthly stock returns.
The Predictability Of Stock Returns
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Author : Zhong-guo Zhou
language : en
Publisher:
Release Date : 1993
The Predictability Of Stock Returns written by Zhong-guo Zhou and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with Capital assets pricing model categories.
Stock Market Probability
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Author : Joseph E. Murphy
language : en
Publisher: McGraw-Hill Companies
Release Date : 1994
Stock Market Probability written by Joseph E. Murphy and has been published by McGraw-Hill Companies this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with Business & Economics categories.
This book describes how to use statistical techniques to manage risk and improve returns. By estimating the probability of various investment outcomes in advance, investors can make better-informed decisions. Joseph Murphy shows how statistical tools and techniques such as standard deviation, disper
Modeling Stock Return Volatility A Comparative Approach
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Author : Robert Krimetz
language : en
Publisher:
Release Date : 2023
Modeling Stock Return Volatility A Comparative Approach written by Robert Krimetz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with categories.
The application of machine learning and probabilistic programming methods on stock return prediction has grown in tandem with the availability of high frequency stock data. With well recorded heteroskedasticity in historical stock returns, modeling attempts have evolved from making general assumptions about the underlying data generating distribution to predicting changes in the underlying distribution of returns. The increase in popularity of 'tradable volatility' through derivative contacts and VIX futures over the past three decades has motivated research efforts to model the variance of daily returns. Along this line of research, three schools of thought have emerged to model return volatility; Time Series Models, Stochastic Models, and Bayesian Models. Given that the preliminary assumptions underlying these models differ, the nature of their results and the varying metrics used to calculate their respective accuracy makes it difficult to directly compare them. Accordingly, the currently available pool of research has diverged along these three separate paths making it unclear the advantages of each. Notably, Bayesian models have largely been neglected in the current pool of research due to their computational intensity. In this paper I derive ten time series and Bayesian models then provide a comprehensive comparative study of the results on real stock data. I found that Bayesian models with intractable posterior distributions significantly outperform time series models at predicting directional change in future volatility, while the GARCH and FIGARCH time series models generate the most accurate point predictions for future volatility. I hope the results outlined in this paper better contextualize different volatility predictions and motivate the creation of more accurate tradeable volatility models.
Predicting Global Stock Returns
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Author : Erik Hjalmarsson
language : en
Publisher:
Release Date : 2008
Predicting Global Stock Returns written by Erik Hjalmarsson and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Econometrics categories.
I test for stock return predictability in the largest and most comprehensive data set analyzed so far, using four common forecasting variables: the dividend- and earnings-price ratios, the short interest rate, and the term spread. The data contain over 20,000 monthly observations from 40 international markets, including 24 developed and 16 emerging economies. In addition, I develop new methods for predictive regressions with panel data. Inference based on the standard fixed effects estimator is shown to suffer from severe size distortions in the typical stock return regression, and an alternative robust estimator is proposed. The empirical results indicate that the short interest rate and the term spread are fairly robust predictors of stock returns in developed markets. In contrast, no strong or consistent evidence of predictability is found when considering the earnings- and dividend-price ratios as predictors.
Empirical Distributions Of Stock Returns
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Author : Felipe Aparicio
language : en
Publisher:
Release Date : 2000
Empirical Distributions Of Stock Returns written by Felipe Aparicio and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with categories.
The assumption that daily stock returns are normally distributed has long been disputed by the data. In this article we test (and clearly reject) the normality assumption using time seriesof daily stock returns for thirteen European securities markets. More importantly, we fit to the data four alternative specifications, find overall support for the scaled-t distribution (and partial support for a mixture of two Normal distributions), and quantify the magnitude of the error that stems from predicting the probability of obtaining returns in specified intervals by using the Normal distribution. We conclude by arguing that normality may be a plausible assumption for monthly (but not for daily) stock returns.
The Clash Of The Cultures
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Author : John C. Bogle
language : en
Publisher: John Wiley & Sons
Release Date : 2012-07-05
The Clash Of The Cultures written by John C. Bogle and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-07-05 with Business & Economics categories.
Recommended Reading by Warren Buffet in his March 2013 Letter to Shareholders How speculation has come to dominate investment—a hard-hitting look from the creator of the first index fund. Over the course of his sixty-year career in the mutual fund industry, Vanguard Group founder John C. Bogle has witnessed a massive shift in the culture of the financial sector. The prudent, value-adding culture of long-term investment has been crowded out by an aggressive, value-destroying culture of short-term speculation. Mr. Bogle has not been merely an eye-witness to these changes, but one of the financial sector’s most active participants. In The Clash of the Cultures, he urges a return to the common sense principles of long-term investing. Provocative and refreshingly candid, this book discusses Mr. Bogle's views on the changing culture in the mutual fund industry, how speculation has invaded our national retirement system, the failure of our institutional money managers to effectively participate in corporate governance, and the need for a federal standard of fiduciary duty. Mr. Bogle recounts the history of the index mutual fund, how he created it, and how exchange-traded index funds have altered its original concept of long-term investing. He also presents a first-hand history of Wellington Fund, a real-world case study on the success of investment and the failure of speculation. The book concludes with ten simple rules that will help investors meet their financial goals. Here, he presents a common sense strategy that "may not be the best strategy ever devised. But the number of strategies that are worse is infinite." The Clash of the Cultures: Investment vs. Speculation completes the trilogy of best-selling books, beginning with Bogle on Investing: The First 50 Years (2001) and Don't Count on It! (2011)
