Economic Predictors for Long-Horizon Stock Returns

Summary

The document lists economic variables suggested as predictors of longer-run stock returns, in response to a request for ticker symbols that could help forecast global equity indexes and subsectors. It groups the examples into interest-rate spreads, credit spreads, and valuation measures.

The interest-rate inputs include the federal funds rate and Treasury yields at several maturities, which can be combined to form spreads. For credit risk, it gives the spread between Moody’s Baa corporate bond yield and the federal funds rate. The valuation examples are the S&P composite dividend yield and price-to-earnings ratio. The answer points to prior discussion as its source but supplies no empirical results, sample period, or details about how to construct or validate forecasts. Its examples are U.S.-focused, so they do not directly answer the request for Canadian, euro-area, or Asia-Pacific tickers, and the stated predictive relationship applies to longer horizons rather than specifying a trading strategy.

Key ideas

• Longer-run stock return research can examine interest-rate spreads built from short- and longer-maturity rates.
• The response identifies the Baa corporate yield minus the federal funds rate as a credit-spread variable.
• S&P dividend yield and price-to-earnings ratio are offered as valuation predictors.
• The listed series are U.S.-oriented and do not fill in the requested non-U.S. data list.

Tags

# List of Economic Data for Index Forecast


# List of Economic Data for Index Forecast












What econometric symbol list (or tickers) could be used to forecast return of global stock market indexes (S&P500, TSX, CAC40, ...) and their subsectors?

I'm aware of the answer to question: What data sources are available online?

What I'm looking to build is a actual list of tickers that could be used from the databases stated above.

Please add to the follow items:



- Canada:

- Euro Zone:

- Asia-Pacific Zone:

## Answer by nbbo2 (score 0, accepted)

https://quant.stackexchange.com/a/19194

There are three categories of variables in Fred that have been shown to have some predictiveness for [longer run] stock returns:

-Interest rate spreads (constructed from the following)

FEDFUNDS Effective Federal Funds Rate

TB3MS 3-Month Treasury Bil

GS1 1-Year Treasury Rate

GS5 5-Year Treasury Rate

GS10 10-Year Treasury Rate

-Credit spreads

BAAFFM Moody's Baa Corporate Bond Minus FEDFUNDS

-DivYields & E/P ratios

S&P div yield S&P's Composite Common Stock: Dividend Yield

S&P_PE_ratio S&P's Composite Common Stock: Price-Earnings Ratio

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.