Value Investing Strategy (Strategy Overview)
Momentum Investing Strategy (Strategy Overview)
Using Long-horizon Returns to Predict/Time the Stock Market
May 8, 2018 • Posted in Big Ideas, Fundamental Valuation
Is use of a sampling interval much shorter than input variable measurement interval a useful statistical practice in financial markets research? In the April 2018 update of their paper entitled “Long Horizon Predictability: A Cautionary Tale”, flagged by a subscriber, Jacob Boudoukh, Ronen Israel and Matthew Richardson examine statistical reliability gains from overlapping measurements of long-horizon variables (such as daily or monthly sampling of 5-year returns or 10-year moving average earnings). They employ the widely used cyclically adjusted price earnings ratio (CAPE, or P/E10) for some examples. Based on illustrations and mathematical derivations, they conclude that: (more…)
Please log in or subscribe to continue reading...
Gain access to hundreds of premium articles, our momentum strategy, full RSS feeds, and more! Learn more