Predicting Stock Market Returns with Aggregate Discretionary Accruals

We find that the positive relation between aggregate accruals and one‐year‐ahead market returns documented in Hirshleifer, Hou, and Teoh [2009] is driven by discretionary accruals but not normal accruals. The return forecasting power of aggregate discretionary accruals is robust to choices of sample periods, return measurements, estimation methods, business condition and risk premium proxies, and accrual models used to isolate discretionary accruals. Our extensive analysis shows that aggregate discretionary accruals, in sharp contrast to aggregate normal accruals, contain little information about overall business conditions or aggregate cash flows and display little co‐movement with ICAPM‐motivated risk premium proxies. Our findings imply that aggregate discretionary accruals likely reflect aggregate fluctuations in earnings management, thereby favoring the behavioral explanation that managers time aggregate equity markets to report earnings.     

Stock Market Returns and Consumption

This paper employs Swedish data on households' stock holdings to investigate how consumption responds to changes in stock market returns. We instrument the actual capital gains and dividend payments with past portfolio weights. Unrealized capital gains lead to a marginal propensity to consume of 23% for the bottom 50% of the wealth distribution and about 3% for the top 30% of the wealth distribution. Household consumption is significantly more responsive to dividend payouts across all parts of the wealth distribution. Our findings are consistent with households treating capital gains and dividends as separate sources of income.     

On Stock Market Returns and Returns on Investment

This article presents general conditions under which it is possible to obtain asset pricing relations from the intertemporal optimal investment decision of the firm. Under the assumption of linear homogeneous production and adjustment cost functions (the Hayashi (1982) conditions), it is possible to establish, state by state, the equality between the return on investment and the market return of the financial claims issued by the firm. This result proves to be, in essence, robust to the consideration of very general constraints on investment and the inclusion of taxes.     

Predicting Stock Returns Using Financial Statement Information

We examine the profitability of the Ou and Penman (1989a) Pr trading strategy and the Holthausen and Larcker (1992) Prob trading strategy over the period 1980–1992 in the UK. This is a test of whether an investor can earn abnormal returns by exploiting fundamental accounting data. We employ alternative abnormal return metrics and research designs to control for risk. Using a UK dataset offers an independent test because the UK differs from the US in its formal and informal financial reporting environment, its structure of share ownership, and the behaviour of its economy over the study period. We find consistent evidence that an investor could have used a summary measure of financial statement information to predict future abnormal returns by indirectly predicting one-year-ahead earnings changes, but only weak and inconsistent evidence that an investor could have used a summary measure of financial statement information to predict one-year-ahead stock returns directly. We offer some thoughts on the reasons for these different results.     

Stock Market Returns and Inflation Forecasts

This study uses data from the Livingston survey of expectations to examine the Fisher hypothesis as a model relating expected stock returns and expected inflation. We show that the Fisher hypothesis holds much better for ex ante expectations than ex post realizations.     

Stock Market Returns and Economic Fundamentals in an Emerging Market: The Case of Korea

This paper investigates the feedback relationship between stock market returnsand economic fundamentals in an emerging market. Starting from an intertemporalconsumption-based CAPM (CCAPM), we obtain a restricted VAR model for stockreturns and macroeconomic variables. We then apply this model to Korea and findstatistically significant departures from the restrictions implied by CCAPM.Consequently, an unrestricted VAR model is used to analyze the variations of expectedand unexpected returns in the Korean stock market. It is shown that the expectedmarket returns vary with a set of macroeconomic variables, and that thepredictable component is substantial. Reflecting richer dynamics in the data,relative to the usual single equation modeling in the literature, the estimatedVAR model shows considerable predictive ability for both real economic activityand real returns. Using the model for a variance decomposition of unexpectedreturns, we find that, although we cannot directly observe the market's revisionof expected future dividend growth, we can estimate a large part of therevision with the news in the expected industry output growth from our VAR model.Finally, we also find that economic fundamentals can explain only a smallportion of the variation in unexpected returns in the Korean stock market.     

中国股票市场关于股票收益的两个假设的检验

使用方差比方法检验中国股票市场上股票收益服从随机游走的假设，检验结果拒绝了该假设。而使用Geweke和Porter—Hudak(1983)提出的分数差分检验，检验结果却支持股票收益存在长期记忆的假设。长期记忆性的存在使得有可能通过建立非线性经济计量模型以改进价格预测效果。     

On Stock Market Returns and Monetary Policy

Financial economists have long debated whether monetary policy is neutral. This article addresses this question by examining how stock return data respond to monetary policy shocks. Monetary policy is measured by innovations in the federal funds rate and nonborrowed reserves, by narrative indicators, and by an event study of Federal Reserve policy changes. In every case the evidence indicates that expansionary policy increases ex-post stock returns. Results from estimating a multi-factor model also indicate that exposure to monetary policy increases an asset's ex-ante return.     

南橘北枳:A股市场的经济关联与股票回报

本文系统检验并比较了中国A股市场中行业动量、区域动量、供应链动量以及科技关联动量等经济关联动量的显著性及预测周期。本文发现,中国股票市场中经济关联因子呈现出与美国股票市场不同的规律,在月度层面行业动量显著,而科技关联因子只在周度上具有显著的预测能力。进一步分析科技关联动量发现,中国股票市场中科技关联因子能预测目标公司未来1-3周的股票收益和未来基本面的变化,据此构建的多空策略能够产生周度0.16%的超额收益(年化8.67%);机制检验发现,科技关联因子预测期短的原因是由于中国股票市场中存在较多具有博彩倾向的散户投资者;有限注意和市场摩擦两个机制检验证明科技关联动量源自错误定价。进一步检验发现,科技关联动量在国有企业和创新政策颁布后更加显著。本文补充了现有A股市场的动量研究,有助于理解中国股票市场规律、提升资本市场有效性。     

The Effect of US Stock Market Uncertainty on Emerging Market Returns

We investigate the effects of US stock market uncertainty (VIX) on the stock returns in Latin America and aggregate emerging markets before, during, and after the financial crisis. We find that increases in VIX lead to significant immediate and delayed declines in emerging market returns in all periods. However, changes in VIX explained a greater percentage of changes in emerging market returns during the financial crisis than in other periods. The higher US stock market uncertainty exerts a much stronger depressing effect on emerging market returns than their own-lagged and regional returns. Our risk transmission model suggests that a heightened US stock market uncertainty lowers emerging market returns by both reducing the mean returns and raising the variance of returns. The VIX fears raise the volatility of emerging market returns through generalized autoregressive conditional heteroskedasticity (GARCH)-type volatility transmission processes.     

The Cross-Section of Expected Stock Returns: New Evidence from an Emerging Market

Over 300 factors have been found to explain the cross-section of expected stock returns. Empirical studies also show that findings from multifactor asset-pricing models have not been consistent in an emerging market. Using DuPont analysis and a residual income valuation model for 284 nonfinancial companies on Ho Chi Minh Stock Exchange during the period 2008–2014, findings suggest that the return on equity and its change are informative for stock returns in Vietnam. In addition, the level of capital turnover, financial cost ratio (FCR), and changes in capital and in the FCR contain incremental explanatory power for stock returns.     

新上市股票异常报酬与经营绩效研究

以1994年到1999年深、沪两市的新上市A股为样本，采用单(配对)样本t-检验、非参数的Wilcoxon配对符秩检验等研究方法，研究了新上市公司股价的异常报酬和财务绩效的关系。研究结果表明新上市公司的股价有短期正异常报酬，而且上市后当年财务经营绩效比上市前要差，上市后第二年财务经营绩效更差。     

Liquidity,Skewness and Stock Returns: Evidence from Chinese Stock Market

In this paper, a capital asset pricing model (CAPM) incorporating liquidity and skewness factors is proposed and tested by using the Chinese stock market data. The empirical results indicate that, under various market conditions, the liquidity-adjusted three-moment CAPM provides a better fit to the realized returns of various stock portfolios. Overall, this research reveals that illiquidity cost, liquidity risk and as well as skewness have important impacts on asset pricing in the Chinese stock market.     

Evaluating the Forecast Accuracy of Emerging Market Stock Returns

This paper analyzes the forecast performance of emerging market stock returns using standard autoregressive moving average (ARMA) and more elaborated autoregressive conditional heteroskedasticity (ARCH) models. Our results indicate that the ARMA and ARCH specifications generally outperform random walk models. Models that allow for asymmetric shocks to volatility are better for in-sample estimation (threshold autoregressive conditional heteroskedasticity for daily returns and exponential generalized autoregressive conditional heteroskedasticity for longer periods), and ARMA models are better for out-of-sample forecasts. The results are valid using both U. S. dollar and domestic currencies. Overall, the forecast errors of each Latin American market can be explained by the forecasts of other Latin American markets and Asian markets. The forecast errors of each Asian market can be explained by the forecasts of other Asian markets, but not by Latin American markets. Our predictability results are economically significant and may be useful for portfolio managers to enter or leave the market.     

Earnings Yields,Market Values,and Stock Returns

Earlier evidence concerning the relation between stock returns and the effects of size and earnings to price ratio (E/P) is not clear-cut. This paper re-examines these two effects with (a) a substantially longer sample period, 1951–1986, (b) data that are reasonably free of survivor biases, (c) both portfolio and seemingly unrelated regression tests, and (d) an emphasis on the important differences between January and other months. Over the entire period, the earnings yield effect is significant in both January and the other eleven months. Conversely, the size effect is significantly negative only in January. We also find evidence of consistently high returns for firms of all sizes with negative earnings.     

Stock Market Returns and Inflation: Evidence from Other Countries

This paper investigates the relation between common stock returns and inflation in twenty-six countries for the postwar period. Our results do not support the Fisher Hypothesis, which states that real rates of return on common stocks and expected inflation rates are independent and that nominal stock returns vary in one-to-one correspondence with expected inflation. There is a consistent lack of positive relation between stock returns and inflation in most of the countries.     

Heteroskedasticity in Stock Returns

We use predictions of aggregate stock return variances from daily data to estimate time-varying monthly variances for size-ranked portfolios. We propose and estimate a single factor model of heteroskedasticity for portfolio returns. This model implies time-varying betas. Implications of heteroskedasticity and time-varying betas for tests of the capital asset pricing model (CAPM) are then documented. Accounting for heteroskedasticity increases the evidence that risk-adjusted returns are related to firm size. We also estimate a constant correlation model. Portfolio volatilities predicted by this model are similar to those predicted by more complex multivariate generalized-autoregressive-conditional-heteroskedasticity (GARCH) procedures.