Stock Return Predictability: Is it There?

Ang, Andrew; Bekaert, Geert

doi:10.1093/rfs/hhl021

Cited by 1,275 publications

(614 citation statements)

References 74 publications

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“…It follows that earnings are informative in providing expectations of future cash flows that contain such news. [8] extended this result to time periods up to five years, finding that earnings yield significantly predicted future cash flows in both the 1-year and 5-year time periods for US data for a time period from 1935-2001 and a pooled four-country sample using data from the United States, United Kingdom, France and Germany. H3: Earnings yield may be a significant explanatory variable of stock returns.…”

Section: Earnings Yield and Stock Returnsmentioning

confidence: 86%

Earnings Yield as a Predictor of Return on Assets, Return on Equity, Economic Value Added and the Equity Multiplier

Abraham¹,

Harris²,

Auerbach³

2017

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This study identifies earnings yield as a measure of financial performance that is based on a firm's ability to sell profitable goods. It excludes the irrationality that can confound market-based measures of financial performance by emphasizing a firm's ability to earn profits as the indicator of superior performance. For the full sample, the differential effects of earnings yield on return on assets, return on equity, stock returns, economic value added and the equity multiplier are determined for firms of different size and volatility. The analysis is conducted both across industries and within the oil and gas, computer software, biotechnology and retail industries. For the full sample of NASDAQ stocks from 2010-2014, earnings yield significantly explained return on assets, return on equity, stock returns, economic value added and the equity multiplier beyond book value and book to market. The influence of earnings yield on return on assets was predictable with linear relationships and autocorrelated residuals, while that for small firms was unpredictable with nonlinear relationships between earnings yield and all outcomes with heteroscedastic residuals. In the oil and gas industry, small producers with low market risk and high firm-specific risk, i.e. drillers in new locations with existing technology, found that earnings yield was related to all outcome measures, while large, high-market risk firms, or drillers using the new shale rock techniques strove for operational efficiency through higher return on assets and return on equity. Market risk demarcates small biotechnology firms with those with low market risk demonstrating the explanation of return on assets by earnings yield, while earnings yield is significantly related to economic value added for high market risk firms. In large biotechnology firms, earnings yield was significantly related to all outcomes. Similar results were obtained for the computer software industry. Retail is in retrenchment with small retailers selling traditional product lines emphasizing return on assets or being operationally efficient for survival, while large retailers borrow against large-

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Section: Earnings Yield and Stock Returnsmentioning

confidence: 86%

Earnings Yield as a Predictor of Return on Assets, Return on Equity, Economic Value Added and the Equity Multiplier

Abraham¹,

Harris²,

Auerbach³

2017

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“…The difference between the long-term yield and the Treasury bill rate is the term spread, which has been widely used in stock return forecasting exercises (See, for example Ang and Bekaert, 2007;Campbell and Yogo, 2006;Fama 7 and French, 1989;Keim and Stambaugh, 1986;Pontiff and Schall, 1998). In particular, Chen (2009) finds this to be significant in predicting bear markets.…”

Section: Treasury Bill Ratementioning

confidence: 99%

Further evidence on bear market predictability: The role of the external finance premium

Chen

Chou

2017

International Review of Economics & Finance

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In this paper, we revisit bear market predictability by employing a number of variables widely used in forecasting stock returns. In particular, we focus on variables related to the presence of imperfect credit markets. We evaluate prediction performance using in-sample and out-of-sample tests. Empirical evidence from the US stock market suggests that among the variables we investigate, the default yield spread, inflation, and the term spread are useful in predicting bear markets. Further, we find that the default yield spread provides superior out-of-sample predictability for bear markets one to three months ahead, which suggests that the external finance premium has an informative content on the financial market.

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“…Számos szerző publikált empirikus eredményeket, melyek megerősítették bizonyos pénzügyi teljesítménymutatók árfolyamra gyakorolt hatását (például EastonHarris-Ohlson [1992], Graham-Pope-Rees [1992], Harris-Lang-Möller [1994], Easton-Sommers [1999], Lewellen [2004], Ang-Bekaert [2007], valamint Takács [2014]). További releváns tanulmányok (többek között Barth et al [1998], Kallapur-Kwan [2004], Takács [2015]) bizonyították, hogy a vállalat aktuális piaci elfogadottsága (melyet a legtöbb kutatásban a márkaértékkel fejeztek ki) szignifikáns magyarázóváltozója az árfolyamnak.…”

Section: Takács Andrásunclassified

A pénzügyi teljesítmény és a piaci elfogadottság hatása a nemzetközi feldolgozóipari, valamint szolgáltatóvállalatok részvényáraira

Takács¹

2017

Statisztika szemle

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Stock Return Predictability: Is it There?

Cited by 1,275 publications

References 74 publications

Earnings Yield as a Predictor of Return on Assets, Return on Equity, Economic Value Added and the Equity Multiplier

Earnings Yield as a Predictor of Return on Assets, Return on Equity, Economic Value Added and the Equity Multiplier

Further evidence on bear market predictability: The role of the external finance premium

A pénzügyi teljesítmény és a piaci elfogadottság hatása a nemzetközi feldolgozóipari, valamint szolgáltatóvállalatok részvényáraira

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