Good Return Predictors for a Portfolio of Stocks
- Thread starter Alexei
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- 6/10/09
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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.
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.
You may find this article helpful.
http://www.robschumaker.com/publications/IPM%20-%20A%20Quantitative%20Stock%20Prediction%20System%20based%20on%20Financial%20News.pdf
http://www.robschumaker.com/publications/IPM%20-%20A%20Quantitative%20Stock%20Prediction%20System%20based%20on%20Financial%20News.pdf