New financial ratios revolutionize predicting stock market performance
The researchers found that using a new financial ratio called the Generalized Price-Dividend Ratio (GPDR) can better predict the equity premium of the S&P 500 compared to traditional methods. By looking at the relationship between stock prices and dividends over time, they were able to make more accurate forecasts for the equity premium at different time horizons. This new approach improves upon existing methods and provides valuable insights for predicting market trends.