Are Indian stock returns predictable

By Paresh Kumar Narayan, D. Bannigidadmath. 2015

155 citations recorded by the source corpus.

In this paper we show that Indian stock returns, based on industry portfolios, portfolios sorted on book-to-market, and on size, are predictable. While we discover that this predictability holds both in in-sample and out-of-sample tests, predictability is not homogenous. Some predictors are important than others and some industries and portfolios of stocks are more predictable and, therefore, more profitable than others. We also discover that a mean combination forecast approach delivers significant out-of-sample performance. Our results survive a battery of robustness tests.

Subfields: Economics and Econometrics, Finance, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/1169614d216d6895a4702ab86ffadd0039c2859d

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Citations in the corpus

Does Financial News Predict Stock Returns? New Evidence from Islamic and Non-Islamic Stocks (2017, background): “This literature is dominated by the financial ratio predictors; see for instance Narayan and Bannigidadmath (2015) for a list of studies on this.”
Forecasting day-ahead electricity prices: A review of state-of-the-art algorithms, best practices and an open-access benchmark (2020, background): “To solve these issues, we argue that a better metric is the relative MAE (rMAE) [128,130].”
Improving the predictability of the oil–US stock nexus: The role of macroeconomic variables (2019, methodology): “Here, the model for the single-factor case ( Sk ) is the parsimonious model, having been found to be a good predictive model for US stock returns by Westerlund and Narayan (2015), while the model for the multiple-factor case ( Mk ) is the larger model.”