TY  - JOUR
AU  - Kandel,Shmuel
AU  - Stambaugh,Robert F.
TI  - On the Predictability of Stock Returns: An Asset-Allocation Perspective
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4997
PY  - 1995
Y2  - January 1995
UR  - http://www.nber.org/papers/w4997
L1  - http://www.nber.org/papers/w4997.pdf
N1  - Author contact info:
Robert F. Stambaugh
Finance Department
The Wharton School
University of Pennsylvania
Philadelphia, PA   19104-6367
Tel: 215/898-5734
Fax: 215/898-6200
E-Mail: stambaugh@wharton.upenn.edu
AB  - The predictability of monthly stock returns is investigated from the perspective of a risk-averse investor who uses the data to update initially vague beliefs about the conditional distribution of returns. The optimal stocks-versus-cash allocation of the investor can depend importantly on the current value of a predictive variable, such as dividend yield, even though a null hypothesis of no predictability might not be rejected at conventional significance levels.  When viewed in this economic context, the empirical evidence indicates a strong degree of predictability in monthly stock returns.
ER  -