A recent research paper authored by Ekaterini Panopoulou of Kent Business School (joint with S. Plastira) entitled ‘COMBINATION FORECASTS OF BOND AND STOCK RETURNS: AN ASSET ALLOCATION PERSPECTIVE’ has ranked among the TOP 10 most downloaded papers in its category within days of it being uploaded onto the Social Science Research Network (SSRN).
The paper investigates the out-of-sample forecasting ability of the HML, SMB, momentum, short-term and long-term reversal factors along with their size and value decompositions on U.S. bond and stock returns for a variety of horizons ranging from the short run (1 month) to the long run (2 years). The authors find that these factors contain significantly more information for future bond and stock market returns than the typically employed financial variables. Combinations of forecasts of the empirical factors turn out to be particularly successful, especially from an asset allocation perspective. Similar findings pertain to the European and Japanese markets.
For more details, the paper is available from the following link: