TY  - JOUR
AU  - Lo,Andrew W.
AU  - MacKinlay,A. Craig
TI  - Maximizing Predictability in the Stock and Bond Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5027
PY  - 1995
Y2  - February 1995
UR  - http://www.nber.org/papers/w5027
L1  - http://www.nber.org/papers/w5027.pdf
N1  - Author contact info:
Andrew W. Lo
MIT Sloan School of Management
100 Main Street, E62-618
Cambridge, MA  02142
Tel: 617/253-0920
Fax: 781/891-9783
E-Mail: alo@mit.edu

A. Craig MacKinlay
Department of Finance, Wharton School
University of Pennsylvania, Steinberg-Dietrich Hal
3620 Locust Walk
Philadelphia, PA  19104-6367
Tel: 215/898-5309
Fax: 215/898-6200
E-Mail: MACKINLAY@WHARTON.UPENN.EDU
M2  - featured in NBER digest on 1995-09-01
AB  - We construct portfolios of stocks and of bonds that are maximally predictable with respect to a set of ex ante observable economic variables, and show that these levels of predictability are statistically significant, even after controlling for data-snooping biases.  We disaggregate the sources for predictability by using several asset groups, including industry-sorted portfolios, and find that the sources of maximal predictability shift considerably across asset classes and sectors as the return-horizon changes.  Using three out-of-sample measures of predictability, we show that the predictability of the maximally predictable portfolio is genuine and economically significant.
ER  -