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

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.

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Year of publication:	2010
Authors:	Zhou, Guofu
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 108.2010, 2, p. 184-186
Publisher:	Elsevier
Keywords:	Predictive regression R-squared Forecasting stock return

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008867004