This is a summary of links featured on Quantocracy on Saturday, 12/05/2015. To see our most recent links, visit the Quant Mashup. Read on readers!
Using the LASSO to Forecast Returns [Alex Chinco]1. Motivating Example A Popular Goal. Financial economists have been looking for variables that predict stock returns for as long as there have been financial economists. For some recent examples, think about Jegadeesh and Titman (1993), which shows that a stocks current returns are predicted by the stocks returns over the previous 12 months, Hou (2007), which shows that the current returns
High Valuations and Low Yields [Sharpe Returns]This is how your average buy-and-hold investor probably feels right now if they are looking to deploy new capital for the long run. Today, bond yields are puny while stock valuations are rich. In fact, we currently have one of the worst yield and value combinations in history as seen in the charts below dating back to 1880: Source: multpl.com Notice on these charts the years 1921 and 1982, when
When can income be growth? [Flirting with Models]Summary Traditionally, stocks have been used for growth and bonds for safety Therefore, investors looking for long-term capital appreciation tended to allocate heavily towards stocks while investors concerned about preservation allocate more heavily towards bonds With an anemic forecast for equity returns over the next decade, could the best place to find growth actually be with income? It is