Stock return predictability over four centuries: the role of commodity returns

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6 Citations (Scopus)

Abstract

We merge two unique historical datasets on commodity and stock prices covering four centuries and three leading stock markets (Netherlands, UK, and US) to show that, consistent with theoretical predictions, commodity returns can predict stock returns. We show that about 64% and 56% of the commodity returns can predict stock returns in-sample and out-of-sample, respectively. Aggregating commodity returns by market, returns from agriculture, energy, and livestock and meat markets appear to consistently predict stock returns. These results are robust to recessions and expansions.

Original languageEnglish
Article number101711
Number of pages8
JournalFinance Research Letters
Volume40
DOIs
Publication statusPublished - May 2021
Externally publishedYes

Keywords

  • Commodity returns
  • Four centuries
  • Stock return predictability

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