A Tactical Implication of Predictability

@inproceedings{Salomons2006ATI,
  title={A Tactical Implication of Predictability},
  author={Roelof Salomons},
  year={2006}
}
This article confirms that high earnings yields portend high equity returns. Absolute valuation levels of equity have predictive power over future long-run equity returns. The predictability is far less powerful in the short term. On a tactical investment horizon, investors tend to rely on the relative valuation of equity versus bonds to gauge whether equity markets are attractive. The FED model, which compares earnings yield and bond yield, is the preferred yardstick in the finance profession… 

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