  One of the most important studies in finance is to find out whether stock
returns could be predicted. This research aims to create a new multivariate
model, which includes dividend yield, earnings-to-price ratio, book-to-market
ratio as well as consumption-wealth ratio as explanatory variables, for future
stock returns predictions. The new multivariate model will be assessed for its
forecasting performance using empirical analysis. The empirical analysis is
performed on S&P500 quarterly data from Quarter 1, 1952 to Quarter 4, 2019 as
well as S&P500 monthly data from Month 12, 1920 to Month 12, 2019. Results have
shown this new multivariate model has predictability for future stock returns.
When compared to other benchmark models, the new multivariate model performs
the best in terms of the Root Mean Squared Error (RMSE) most of the time.
