While traditional predictive regressions for stock returns using financial ratios are empirically proven to be valuable at long-term horizons, evidence of predictability at few-month horizons is still weak. In this paper, based on the empirical regularity of a typical dynamic of stock returns...

This paper considers forecasting regressions of quot;realized volatilityquot; on a misalignment measure defined by the temporary deviations from the common trend between the earning-price ratio and current inflation. Results show that this misalignment measure is useful to predict stock market...