Stock return predictability and the adaptive markets hypothesis: evidence from century-long US data

Title: Stock return predictability and the adaptive markets hypothesis: evidence from century-long US data
Creator: Kim, Jae H.; Shamsuddin, Abul; Lim, Kian-Ping
Relation: Journal of Empirical Finance Vol. 18, Issue 5, p. 868-879
Publisher Link: http://dx.doi.org/10.1016/j.jempfin.2011.08.002
Publisher: Elsevier
Resource Type: journal article
Date: 2011
Description: This paper provides strong evidence of time-varying return predictability of the Dow Jones Industrial Average index from 1900 to 2009. Return predictability is found to be driven by changing market conditions, consistent with the implication of the adaptive markets hypothesis. During market crashes, no statistically significant return predictability is observed, but return predictability is associated with a high degree of uncertainty. In times of economic or political crises, stock returns have been highly predictable with a moderate degree of uncertainty in predictability. We find that return predictability has been smaller during economic bubbles than in normal times. We also find evidence that return predictability is associated with stock market volatility and economic fundamentals.
Subject: economic bubbles; economic crises; adaptive markets hypothesis; market efficiency; U.S. stock market
Identifier: http://hdl.handle.net/1959.13/936938
Identifier: uon:12447
Identifier: ISSN:0927-5398
Language: eng
Full Text
Reviewed

		Thumbnail	File	Description	Size	Format