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Are Indian stock returns predictable?

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  • Bannigidadmath, Deepa
  • Narayan, Paresh Kumar

Abstract

In this paper we show that Indian stock returns, based on industry portfolios, portfolios sorted on book-to-market, and on size, are predictable. While we discover that this predictability holds both in in-sample and out-of-sample tests, predictability is not homogenous. Some predictors are important than others and some industries and portfolios of stocks are more predictable and, therefore, more profitable than others. We also discover that a mean combination forecast approach delivers significant out-of-sample performance. Our results survive a battery of robustness tests.
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  • Bannigidadmath, Deepa & Narayan, Paresh Kumar, 2015. "Are Indian stock returns predictable?," Working Papers fe_2015_07, Deakin University, Department of Economics.
    • Handle: RePEc:dkn:econwp:fe_2015_07
    DOI: 10.1016/j.jbankfin.2015.05.001
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