Abstract
Long-horizon return regressions have effectively small sample sizes. Using overlapping long-horizon returns provides only marginal benefit. Adjustments for overlapping observations have greatly overstated t-statistics. The evidence from regressions at multiple horizons is often misinterpreted. As a result, there is much less statistical evidence of long-horizon return predictability than implied by existing research, casting doubt over claims about forecasts based on stock market valuations and factor timing.
Description
Long Horizon Predictability: A Cautionary Tale by Jacob Boudoukh, Ronen Israel, Matthew P. Richardson :: SSRN