Return predictability in the Chinese stock markets
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F830. 91

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    Abstract:

    This paper investigates the return predictability to understand the theoretical foundation of quantitative investments in Chinese stock markets. Eight factors ( book-to-market ratio,dividend-payout ratio,dividend-price ratio,dividend-yield ratio,earnings-price ratio,cash flow-price ratio,inflation rate,stock variance) are employed to carry out in-sample predictability tests by means of the feasible generalized least squares method ( FQGLS) . Out-of-sample predictability tests are conducted in different economic cycles. It is found that: 1) The portfolios can be successfully predicted and the predictability is dependent on the cycle and the portfolio type; 2) The predictability of most portfolios can be explained by the conditional CAPM model;and 3) The return predictability in industries is significantly negatively correlated with industry concentration.

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  • Online: October 25,2021
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