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Good Return Predictors for a Portfolio of Stocks

Joined
3/28/09
Messages
122
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28
What might be good future return predictors for a portfolio of stocks?
 
It's somewhat trivial to prove that there aren't any that are that good...
 
Hi Alexei,

It would depend on what portfolio and what do you understand by "future" and by "prediction".

Exact return prediction of a pure long portfolio 20 years from now is impossible.

But a dollar neutral long/short portfolio can have a predictable conditional return. Take a look at Ornstein Uhlenbeck processes.

Also if by prediction you just mean if its going up or down, there are factors of a stock (relative to the current level of the industry/sector) that can have some predictive power (for some time horizons). Take a look at value investing.

Short term sign and or level forecasting (not the actual value) can be done looking other markets that correlate (have info) about the equities markets. Take a look at the VIX and the Put/Call ratio.

Hope it helps.
 
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