发表期刊：Journal of Empirical Finance
发表时间：June 2023
作者及单位：Deshui Yu, Difang Huang, Li Chen*123
1. Wang Yanan Institute for Studies in Economics (WISE), Xiamen University, China
2. Department of Finance, School of Economics, Xiamen University, China
3. MOE Key laboratory of Econometrics, Xiamen University, China
摘要：According to present-value models, financial valuation ratios should predict future stock returns or cash flows; however, when tested empirically, these ratios show little power. This paper develops insights into stock return predictability and reconciles the contradictory findings about the information provided by financial ratios. We decompose a financial ratio into a slow-moving component that reflects the time-varying local mean, and a cyclical component that reflects the transitory deviations of the ratio from its local mean. The cyclical components deliver substantially improved in- and out-of-sample forecast gains of stock returns and cash flows relative to the original financial ratios and the historical average benchmark. Conversely, the slow-moving components fail to predict returns, and therefore they are found to disguise the predictive information contained in the financial ratios for stock returns and cash flows.
关键词：Stock return predictability; Slow-moving and cyclical movements; Present-value models; Nonparametric decomposition
