Business conditions, monetary policy, and expected security returns

Article Abstract:

The effects of business conditions, which are reflected by term spreads, dividend yield, and default spread, on the expected stock and bond returns is dependent on the kind of existing monetary policy. Dividends yield and default premiums affect security returns if an expansive monetary policy exists, while the term spread significantly affects returns only if restrictive monetary policy exists. Moreover, dividend yield is only a marginal factor in predicting returns during expansive policy periods.

Analysis, Evaluation, Securities, Monetary policy

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Book-to-market ratios as predictors of market returns

Article Abstract:

A cash flow proxy was devised in order to assess the book-to-market ratios of the Dow Jones Industrial Average (DJIA) and the Standard and Poor (S and P) industrial index from 1926 to 1991. The DJIA book to market ratio, proves to be more efficient in forecasting returns than information on future returns such as interest yield spreads and dividend yields. However, results show the S and P book-to-market ratio to outperform the DJIA after 1960 in forecasting market cash flow.

Financial Management, Research, Stock price forecasting, Book value (Accounting), Dow Jones Industrial Average (Index), Standard and Poor's Industrial Index (Index)

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