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Forecasting stock returns with sum-of-the-parts methodology: international evidence

Author

Listed:
  • Mahtab Athari

    (Concord University)

  • Atsuyuki Naka

    (University of New Orleans)

  • Abdullah Noman

    (University of North Carolina at Pembroke)

Abstract

This study applies and extends the sum-of-the-parts (SOP) method for forecasting stock returns by proposing an adjusted SOP (ASOP) and assessing its performance across 32 developed and emerging markets. It provides a comprehensive evaluation of the SOP methodology’s effectiveness across various markets. It shows ASOP’s improved forecasting accuracy and economic gains for investors, outperforming in 28 countries. This research contributes to the forecasting literature by highlighting ASOP’s effectiveness and practicality with financial and market data. Despite varying performance across markets, the findings suggest ASOP’s potential as a tool for financial analysts and portfolio managers, offering avenues for further research on its applicability in different financial environments.

Suggested Citation

  • Mahtab Athari & Atsuyuki Naka & Abdullah Noman, 2025. "Forecasting stock returns with sum-of-the-parts methodology: international evidence," Journal of Asset Management, Palgrave Macmillan, vol. 26(1), pages 91-114, February.
    • Handle: RePEc:pal:assmgt:v:26:y:2025:i:1:d:10.1057_s41260-024-00380-1
    DOI: 10.1057/s41260-024-00380-1
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    More about this item

    Keywords

    Stock return forecasting; Sum of the parts; Out-of-sample performance; Trading strategies; Developed markets; Emerging markets;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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