Tobin’S Q Versus Cape Versus Caper: Predicting Stock Market Returns Using Fundamentals and Momentum
AbstractThis paper predicts the stock market using Tobin’s q, momentum, the Campbell-Shiller CAPE, and a new variant of the CAPE, the CAPER—trend earnings calculated using regressions of log earnings on time. The CAPER is superior to the CAPE. But q emerges as by far the best of the predictors. Two versions of the model are built. The one with momentum predicts a 29% fall in real wealth over the eight years from end 2010. The one without momentum predicts real wealth to increase over all time horizons, but even after fifteen years, only a 32% increase in real wealth.
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Bibliographic InfoPaper provided by Duke University, Department of Economics in its series Working Papers with number 12-02.
Date of creation: 2012
Date of revision:
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Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
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Web page: http://econ.duke.edu/
CAPE; CAPER; Tobin’s q; momentum; stock market;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-15 (All new papers)
- NEP-FOR-2012-05-15 (Forecasting)
- NEP-MAC-2012-05-15 (Macroeconomics)
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