Stock return predictability in emerging markets

Mathias Gaarde & Henrik Apall

Student thesis: Master thesis

Abstract

This thesis tests for predictability of stock return in a set of twenty emerging markets. Stock return predictability is arguably without doubt the most intensely debated issue of empirical asset pricing. In the recent two decades many financial economist have argued that return prediction is present, and that it stems from counter cyclical variation in expected returns. Influenced by this, we have chosen a comprehensive set of twelve conditional variables. In addition to test the predictive ability of each specific variable in a univariate analysis, we also employ a combination forecast. This has recently been used by Rapach, Stauss and Zhou (2010) and proved to significantly enhance the predictive ability of 15 conditional variables. This is also in line with our finding.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2011
Number of pages141