Elusive Return Predictability: Discussion

7 Pages Posted: 3 Nov 2008

See all articles by Stephen J. Brown

Stephen J. Brown

New York University - Stern School of Business

Date Written: 2007

Abstract

Two major conclusions follow from this very careful study. First, sophisticated prediction tools do not fare well relative to naive models predicting return based on past sample means. Second, there appear to be short-lived episodes of quite limited return predictability. These conclusions are consistent with all we know from the theoretical developments in financial economics over the past thirty five years and more. Yet how do we reconcile these facts with the widespread perception that market returns are in fact predictable, and that hedge funds in particular are adept at exploiting this predictability?

Suggested Citation

Brown, Stephen J., Elusive Return Predictability: Discussion (2007). NYU Working Paper No. FIN-07-034, Available at SSRN: https://ssrn.com/abstract=1293621

Stephen J. Brown (Contact Author)

New York University - Stern School of Business ( email )

Stern School of Business
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