HomeResearchPublications

The Economic Benefit of Forecasting Market Components for Mean-Variance Investors

back to overview

Reference

Kaiser, L., & Stöckl, S. (2016). The Economic Benefit of Forecasting Market Components for Mean-Variance Investors. University of Liechtenstein.

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

DOI

http://dx.doi.org/https://dx.doi.org/10.2139/ssrn.2901935