This article examines the robustness of the evidence on predictability of U.S. stock returns, and addresses the issue of whether this predictability could have been historically exploited by investors to earn profits in excess of a buy-and-hold strategy in the market index. We find that the predictive power of various economic factors over stock returns changes through time and tends to vary with the volatility of returns. The degree to which stock returns were predictable seemed quite low during the relatively calm markets in the 1960s, but increased to a level where, net of transaction costs, it could have been exploited by investors in the volatile markets of the 1970s. MANY RECENT STUDIES CONCLUDE that stock returns can be predicted by means of publicly available information, such as time series data on financial and macroeconomic variables with an important business cycle component.' This conclusion seems to hold across international stock markets as well as over different time horizons. Variables identified by these studies to have been statistically important for predicting stock returns include interest rates, monetary growth rates, changes in industrial production, inflation rates, earnings-price ratios, and dividend yields. However, the economic interpretation of these results is controversial and far from evident. First, it is possible that the predictable components in stock returns reflect time-varying expected returns, in which case predictability of stock returns is, in principle, consistent with an efficient stock market. A second interpretation takes expected returns as roughly constant and regards predictability of stock returns as evidence of stock market inefficiency. It is, however, clear that predictability of excess returns on its own does not imply stock market inefficiency, and can be

Predictability of Stock Returns: Robustness and Economic Significance

This paper is the first study of long-run evolution of investor protection, equity financing and corporate ownership in the U.K. over the 20th century. Formal investor protection only emerged in the second half of the century. We assess its influence on ownership by comparing cross-sections of firms at different times in the century and the evolution of firms incorporating at different stages of the century. Investor protection had little impact on dispersion of ownership: even in the absence of investor protection, there was a high rate of dispersion of ownership, primarily associated with mergers. Ownership dispersion in the UK relied more on informal relations of trust than on formal systems of regulation. Preliminary evidence for this comes from the geographical proximity of shareholders to their boards of directors, the absence of price discrimination in takeovers and retention of directors of target boards in merged firms.

/pdf/ownership-evolution-and-regulation-2r7ov7knsr.pdf

Ownership: Evolution and Regulation

This paper applies an extended and generalised version of the recursive modelling strategy developed in Pesaran and Timmermann (1995) to the UK stock market. The focus of the analysis is to simulate investors' search in ‘real time’ for a model that can forecast stock returns. We find evidence of predictability in UK stock returns which could have been exploited by investors to improve on the risk-return trade-off offered by a passive strategy in the market portfolio. Alternative interpretations of this finding are briefly discussed.

A Recursive Modelling Approach to Predicting UK Stock Returns

Investment in Capital Markets creates a strategic vision on the financial capital investment in the capital markets with the aim to get an increased return premium in the short and long time periods. The book is written with a main goal to explain the pros and cons of the financial capital investment in the capital markets, discussing the sophisticated investment concepts and techniques in the simple understandable readable general format language. We would like to highlight the three interesting facts about the book: 1. It is centered on the consideration of the modern investment products, the investment vehicles and the investment mediums for the financial capital investment in the capital markets; 2. It is focused on the financial risk calculation and mitigation techniques for the financial capital investment in the financial capital markets. 3. It is aimed to describe the quantum winning virtuous investment strategies creation and execution techniques during the financial capital investment in the capital markets. The investors, financiers, economists, financial analysts, financial traders, financial advisers, lawmakers, policy analysts, subject experts, professors, and students will certainly enjoy a breathtaking splendid learning journey with the explained new ideas, established concepts and outlined future prospects toward the financial capital investment in the capital markets with the aim to get an increased return premium in the short and long time periods.

Investment in capital markets

This article quantifies the growth in the number of professional accountants in British management, charts their influence over the past century, and analyses the causes. It is most likely that Britain initially spawned large numbers of accountants because of the particular nature of its capital market which led to demands for the independent auditing of company accounts. British companies then recruited their accountants from this ever growing pool of professionally qualified auditors and the reason why these accountants rose to the top in British management was probably that the profession provided virtually the only formal management training available in Britain.

William Arthur Thomas

Papers

The Stock Exchange: Its History and Functions.

The Stock Exchange: Its history and functions

The London Stock Exchange : its history and functions