Exploiting price misalignements
AbstractSigni�cant cumulative above the market returns can be made by diversifying wealth between equity and bond assets over time. The main premise of the trading rule model is to identify when should assets be held in the bond and equity markets in real time. The model involves comparing the net present value of the equity index with the actual price. Recursive and Rolling forecasts of dividends from three regression schemes are used to proxy expected dividends. The returns are sensitive to the forecasting model and the discount factor adopted in the net present value relation.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 27147.
Date of creation: 09 Sep 2009
Date of revision:
Net Present Value; Dividend forecasts; Real-time; Trading Rule; Excess volatility;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
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