Evaluating the Predictive Power of Leading Indicators Used by Analysts to Predict the Stock Return for Norwegian Listed Companies

Abstract

This paper studies the predictive power of leading indicators used by interviewed analysts to predict the monthly excess stock returns for some of the most influential Norwegian companies listed on the Oslo Stock Exchange. The thesis primarily seeks to evaluate whether a multiple factor forecast model or a forecast combination model incorporating additional explanatory variables have the ability to outperform a five common factor (FCF) benchmark forecast model containing common factors for the Norwegian stock market. The in-sample and out-ofsample forecasting results indicate that a multiple factor forecast model fails to outperform the FCF benchmark model. Interestingly, a forecast combination model with additional explanatory variables for the Norwegian market is expected to outperform the FCF benchmark forecast model.