Economic Significance of Predictable Variations in Stock Index Returns

WILLIAM BREEN*, LAWRENCE R. GLOSTEN, RAVI JAGANNATHAN

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

300 Scopus citations

Abstract

Knowledge of the one‐month interest rate is useful in forecasting the sign as well as the variance of the excess return on stocks. The services of a portfolio manager who makes use of the forecasting model to shift funds between bills and stocks would be worth an annual management fee of 2% of the value of the assets managed. During 1954:4 to 1986:12, the variance of monthly returns on the managed portfolio was about 60% of the variance of the returns on the value weighted index, whereas the average return was two basis points higher. 1989 The American Finance Association

Original languageEnglish (US)
Pages (from-to)1177-1189
Number of pages13
JournalThe Journal of Finance
Volume44
Issue number5
DOIs
StatePublished - Jan 1 1989

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Economic Significance of Predictable Variations in Stock Index Returns'. Together they form a unique fingerprint.

Cite this