How much stock return predictability can we expect from an asset pricing model?

Guofu Zhou

doi:10.1016/j.econlet.2010.05.008

How much stock return predictability can we expect from an asset pricing model?

Guofu Zhou

Research output: Contribution to journal › Article › peer-review

25 Scopus citations

Abstract

We provide a new upper bound on the R-squared of a predictive regression of stock returns on predictable variables, tightening substantially Ross's (2005) bound. An empirical application illustrates that while Ross's bound is not binding, our bound does.

Original language	English
Pages (from-to)	184-186
Number of pages	3
Journal	Economics Letters
Volume	108
Issue number	2
DOIs	https://doi.org/10.1016/j.econlet.2010.05.008
State	Published - Aug 2010

Keywords

Forecasting stock return
Predictive regression
R-squared

Access to Document

10.1016/j.econlet.2010.05.008

Cite this

@article{17106b2ea2154498acf4be138e33fcb7,

title = "How much stock return predictability can we expect from an asset pricing model?",

abstract = "We provide a new upper bound on the R-squared of a predictive regression of stock returns on predictable variables, tightening substantially Ross's (2005) bound. An empirical application illustrates that while Ross's bound is not binding, our bound does.",

keywords = "Forecasting stock return, Predictive regression, R-squared",

author = "Guofu Zhou",

year = "2010",

month = aug,

doi = "10.1016/j.econlet.2010.05.008",

language = "English",

volume = "108",

pages = "184--186",

journal = "Economics Letters",