Reference
Kaiser, L., & Stöckl, S. (2016). The Economic Benefit of Forecasting Market Components for Mean-Variance Investors.
Publication type
Working Paper
Abstract
Existing studies focus on variables’ predictive quality with respect to the aggregated stock market, which per definition contains a minimum level of idiosyncratic risk and provides a favorable environment for such applications. Economic intuition suggests that the level of out-of-sample predictability decreases as we climb down the ladder from market aggregates to industries and ultimately single stock returns. Thereon, we ask the central question: Do forecasting errors from direct predictions of market components out-way the additional errors introduced by an intermediary asset pricing model? This is an early stage research note and we welcome any feedback and comments.
Persons
Organizational Units
- Institute for Financial Services
- Chair in Business Administration, Banking and Financial Management
- Chair in Finance