Out-of-sample stock return predictability in emerging markets

This article builds on the widely debated issue of stock return predictability by applying a broad range of predictor variables and comprehensively considering the in-sample and out-of-sample stock return predictability of ten advanced emerging markets. It compares forecasts from models with a single predictor variable, multiple predictor variables and a combination forecast approach. The results confirm the findings of Welch and Goyal (2008) for US data that only a limited number of individual predictor variables are able to deliver significant out-of-sample forecasts. However, a combination forecast approach provides statistically and economically significant out-of-sample forecast results.