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A Comparison of Relative Predictive Power for Financial Models of Rates of Return

Published online by Cambridge University Press:  06 April 2009

Jerald H. Udinsky  and
Daniel Kirshner
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Extract

The need for an empirical measure of the relative value of financial theories becomes more important as we increase their number and sophistication. Although there are several methods of determining value, here we emphasize relative predictive power. According to this single criterion, a theory is insignificant if it fails to increase our present ability to predict future events. We recognize, however, that a theory can be useful if it merely increases our understanding of real events, or if it is based upon realistic assumptions.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 14 , Issue 2 , June 1979 , pp. 293 - 315
Copyright
Copyright © School of Business Administration, University of Washington 1979

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