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Activity Number: 621 - Portfolio Choice, Stock Returns, Bankrupcty, and Default
Type: Contributed
Date/Time: Thursday, August 3, 2017 : 8:30 AM to 10:20 AM
Sponsor: Business and Economic Statistics Section
Abstract #324119 View Presentation
Title: Estimating Country Indexes Returns Based on Earnings Forecasts
Author(s): Daiane Dos Santos and Ricardo Weiss*
Companies: PUC - Rio de Janeiro and R Weiss Consultoria
Keywords: Country Equity Indexes ; Earnings Estimates ; SUTSE ; Statistical Models ; Time Series

One of the secrets of portfolio management is security selection. In this article, we present statistical models showing that expected profits are an appropriate forecast measure for future returns. The assumption is that future equity index prices for different countries are influenced by earnings estimates for the next 12 months, currency levels and risk. Country Indexes will be selected among the 46 countries - Developed and Emerging - covered by MSCI. Tests will also be performed for different time frames. The suitability of single country indices against the combination of countries in a specific region and the degree of market development (developed, emerging) will also be tested. For this purpose, SUTSE structure - Seemingly Unrelated Time Series Equations - introduced by Harvey in 1989 will be adopted as well as Durbin and Koopman structural model disclosed as of 2001. In structure models, time series are interpreted as the sum of components. These are estimated recursively through smoothing algorithms.

Authors who are presenting talks have a * after their name.

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