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Economic forces and the OMXS30 - A study of economic variables' ability to predict stock returns on the OMXS30

Andersson, Pierre LU and Karlsson, Mikael LU (2013) NEKH01 20131
Department of Economics
Abstract
This paper investigates whether the information from a number of different economic
variables have the ability to predict stock returns on the OMXS30. The estimated forecast models are evaluated with a number of standard metrics to find the best performing models. These models are then used in combination with two portfolio strategies and tested over different time periods and forecast horizons, thereby giving an insight into the economic value of the underlying forecast models actual performance. The economic results are then compared with a benchmark model consisting of a simple buy and hold strategy to find the best performing combination of portfolio strategies and forecast models.

Generally, none of the used economic variables are... (More)
This paper investigates whether the information from a number of different economic
variables have the ability to predict stock returns on the OMXS30. The estimated forecast models are evaluated with a number of standard metrics to find the best performing models. These models are then used in combination with two portfolio strategies and tested over different time periods and forecast horizons, thereby giving an insight into the economic value of the underlying forecast models actual performance. The economic results are then compared with a benchmark model consisting of a simple buy and hold strategy to find the best performing combination of portfolio strategies and forecast models.

Generally, none of the used economic variables are found to be a consistent predictor over all time periods, even though a few managed portfolios succeed in outperforming the buy and hold strategy over some specific time periods, only one portfolio (Switch Rec Bivariate OilExch 1 month) outperforms the buy and hold over all time periods. In the end we conclude that our findings are not conclusive enough to verify whether the final outcomes of the successful portfolio management strategies are the case of ‘good’ forecasting, or that of randomness and luck. (Less)
Please use this url to cite or link to this publication:
author
Andersson, Pierre LU and Karlsson, Mikael LU
supervisor
organization
course
NEKH01 20131
year
type
M2 - Bachelor Degree
subject
keywords
OMXS30, Stock Returns, Portfolio Management, Forecasting
language
English
id
3808368
date added to LUP
2013-06-20 10:49:17
date last changed
2013-06-20 10:49:17
@misc{3808368,
  abstract     = {This paper investigates whether the information from a number of different economic
variables have the ability to predict stock returns on the OMXS30. The estimated forecast models are evaluated with a number of standard metrics to find the best performing models. These models are then used in combination with two portfolio strategies and tested over different time periods and forecast horizons, thereby giving an insight into the economic value of the underlying forecast models actual performance. The economic results are then compared with a benchmark model consisting of a simple buy and hold strategy to find the best performing combination of portfolio strategies and forecast models.

Generally, none of the used economic variables are found to be a consistent predictor over all time periods, even though a few managed portfolios succeed in outperforming the buy and hold strategy over some specific time periods, only one portfolio (Switch Rec Bivariate OilExch 1 month) outperforms the buy and hold over all time periods. In the end we conclude that our findings are not conclusive enough to verify whether the final outcomes of the successful portfolio management strategies are the case of ‘good’ forecasting, or that of randomness and luck.},
  author       = {Andersson, Pierre and Karlsson, Mikael},
  keyword      = {OMXS30,Stock Returns,Portfolio Management,Forecasting},
  language     = {eng},
  note         = {Student Paper},
  title        = {Economic forces and the OMXS30 - A study of economic variables' ability to predict stock returns on the OMXS30},
  year         = {2013},
}