Long-term Returns Research Articles

Firm Responses to Nonprescriptive Pollution Regulation: Evidence from China’s Corporate Social Responsibility Reporting Mandate

ABSTRACT We employ China’s mandatory corporate social responsibility (CSR) reporting requirement as a natural experiment to evaluate firm-level responses to a Chinese rule that required public firms to issue CSR reports beginning in 2009. Our difference-in-differences analyses of firm-level data indicate that firms required to issue CSR reports decreased overall pollution levels after the mandate. Conventional wisdom (the “Traditional View”) argues that pollution reductions cannot be achieved without profit sacrifice. Conversely, under the Porter Hypothesis, non-prescriptive regulations can stimulate innovations that improve process efficiency and lead to both pollution reductions and improved long-term shareholder returns. Our results reveal evidence of reduced asset returns among firms required to issue CSR reports after 2008, consistent with both hypotheses. However, consistent with the Porter Hypothesis and not the Traditional View, positive three-day stock returns surrounding the release of CSR report information suggest that shareholders favorably view the overall long-term effects of required CSR reports.

Applicability of Each Pricing Model in the Chinese Stock Market

In order to obtain a higher long-term average return from a portfolio, investors need to increase the level of risks that cannot be dispersed by diversification in the portfolio, and the asset pricing model can help investors to judge how much risk is reasonable to take. This paper will introduce the development process of several asset pricing models, and integrate and overview the applicability of the above several asset pricing models in Chinas capital market by combining the relevant research of domestic and foreign scholars over the years based on existing literature and data analysis results. Finally, it can be found that due to its strict prerequisites, Capital Asset Pricing Model (CAPM) has the lowest applicability in the Chinese stock market, while the Five-Factor Model and the pricing model based on beta decomposition both have good applicability, but it is hard to say which one is the best one to adapt to the Chinese stock market at present.

41 Genetic Selection for Improved Profit Conditioned on Enterprise-Specific Circumstances

Abstract Circumstances of producers relative to objectives, economic constraints, and production environments differ substantially. Consequently, the specific path of sustainability differs among beef enterprises. Such a path must take a supply-chain approach, contemplating market (consumer) demands, and firm-level economic costs and returns in both the short- and long- term. Long-term economic returns imply longer-term stewardship of natural resources. Genetic selection is uniquely poised to aid in the pursuit of greater economic and biological efficiency, given it represents a cumulative and permanent source of change. However, it is critical that such change be consistent with the producer-specific sustainability path. Given there are multiple traits that impact economic outcomes economic selection indexes are the appropriate tool. The general form of such indexes has been around for about 80 years, albeit with a less than desirable adoption rate in beef selection decisions. The process of index development can account for known sensitivities to differences in marketing endpoints and current levels of phenotypic performance. Moreover, the time horizon used to determine the economic consequences of a selection decision could differ among enterprises. The choice of planning horizon (PH) is an important, yet often overlooked component of breeding objective and index construction. Shorter PH inherently emphasizes traits that can be fully expressed in the near term whilst longer PH allow more substantial weighting of traits expressed later in life. Misalignment of breeding objectives and selection indexes, as might be the case in using a terminal index to choose sires in a self-replacing herd, or incorrect choice of PH could lead to less profitable genetic selection decisions by increasing mature cow weight and/or de-emphasizing reproductive longevity. Consequently, our objective was to provide examples of how trait emphasis might be altered under different assumptions during selection index development using the web-based tool iGENDEC. Indexes assumed replacement females were retained and terminal animals were retained through harvest. We then compared changes in PH, annual cow variable costs, and phenotypic means of hot carcass weight (HCW). The combined relative emphasis (RE) of mature cow weight (MWT) and stayability (STAY) in the breeding objective was 0, 10, and 22% when planning horizon was 2, 10, and 20 years, respectively. As HCW increased from 318 to 408 kg the RE of STAY increased from 10.9% to 18.7% while the RE of HCW decreased from 43.8% to 28.9%. When annual cow variable costs were $250, $500, and $750 the RE of MWT was 6, 14.9, and 22.5%, respectively, assuming the value of calves sold stayed the same. Collectively, these examples illustrate that incorrect definition of breeding objectives and parametrization of indexes can lead to inappropriate weighting of traits that are drivers of long-term resource use (i.e., MWT and STAY).

Live slow, die old: larval propagation of slow-growing, stress-tolerant corals for reef restoration

Efforts to restore coral reefs usually involve transplanting asexually propagated fast-growing corals. However, this approach can lead to outplanted populations with low genotypic diversity, composed of taxa susceptible to stressors such as marine heatwaves. Sexual coral propagation leads to greater genotypic diversity, and using slow-growing, stress-tolerant taxa may provide a longer-term return on restoration efforts due to higher outplant survival. However, there have been no reports to date detailing the full cycle of rearing stress-tolerant, slow-growing corals from eggs until sexual maturity. Here, we sexually propagated and transplanted two massive slow-growing coral species to examine long-term success as part of reef restoration efforts. Coral spat were settled on artificial substrates and reared in nurseries for approximately two years, before being outplanted and monitored for survivorship and growth for a further four years. More than half of initially settled substrates supported a living coral following nursery rearing, and survivorship was also high following outplantation with yields declining by just 10 to 14% over four years. At 6-years post-fertilisation over 90% of outplanted corals were reproductively mature, demonstrating the feasibility of restoring populations of sexually mature massive corals in under a decade. Although use of slower growing, stress tolerant corals for reef restoration may provide a longer-term return on investment due to high post-transplantation survival rates, considerable time is required to achieve even modest gains in coral cover due to their relatively slow rates of growth. This highlights the need to use a mix of species with a range of life-history traits in reef restoration and to improve survivorship of susceptible fast-growing taxa that can generate rapid increases in coral cover.

Shhh… Do Gender-Diverse Boards Prioritize Product Market Concerns Over Capital Market Incentives?

We examine whether gender-diverse boards prioritize product market concerns over capital market incentives when proprietary costs are high. We argue that gender-diverse boards protect their firm’s competitive edge and maximize long-term shareholder wealth by ethically and carefully maintaining the confidentiality of proprietary information. Due to the reduced disclosure of proprietary information, firms with gender-diverse boards are likely to face more adverse selection when proprietary costs are high. However, the reduced disclosure of proprietary information enables firms with gender-diverse boards to enhance and maintain their competitive edge and gain higher long-term returns. Using a matched sample of the United States-listed companies, we find that firms with gender-diverse boards, relative to similar firms with all-male boards, (1) are associated with higher adverse selection costs and (2) higher long-run stock returns when the firm faces high product market competition. Collectively, our results suggest that firms with gender-diverse boards, which initially experience higher adverse selection in a competitive environment, are rewarded with a net gain of about 10 percent of their stock price in three years. Our research contributes to the literature by highlighting the importance of board gender diversity in fostering the ethical redaction of proprietary information for proprietary cost-based motives as opposed to agency cost-based motives. Our findings have important implications for regulators, firms, and shareholders by identifying gender-diverse boards as an antecedent for the ethical redaction of proprietary information.

The Impact of the Federal Reserve's Interest Rate Hike on Gold Futures Prices: The Dynamic Trend

This article aims to study how the increase in the Federal Reserve’s Interest Rate is going to impact the gold futures prices under a global economic recession period. Through collecting historical gold prices in chronological order from 2010, the data are then adapted into ARIMA model. It is to investigate the predicted correlation between the macro indicators and performance of the financial derivatives. The result includes that the policy change will have more dominant effects in the long run than short run. The real-world analysis should also incorporate multiple factors that range from qualitative to quantitative to facilitate a more precise prediction of future derivative’s price. The significance of the study is to suggest the time value of policy. Investors who hope to yield long-term return, should pick historical data, and learn the resultant change that happen only a few months after the policy announcement. The authorities should also take note of the intensity of the policy change, trying their best to achieve its economic goal at once, which would avoid rippling vicious effect and panic among the public.

The Effect Of Economic Value Added (Eva), Market Value Added (MVA), Refined Economic Value Added (REVA) On Stock Prices And Stock Returns In Manufacturing Companies Listed In Indonesia Stock Exchange

The development of stock returns of manufacturing companies shows fluctuating movements from year to year. Return movements like this indicate that the condition of the manufacturing company is unstable so that it has an impact on the resulting stock returns. This uncertainty will certainly create its own concerns for investors who will invest in shares in manufacturing companies. With this, it is important for investors to analyze the company's condition first so that the investment made can provide returns. One aspect of the company that can be assessed by investors is the company's performance through financial statements. Helfert (2012: 98) grouped company performance measurements into three groups, namely (1) Earning Measures, (2) Cash Flow Measures, (3) Value Measures. Performance measurement based on value measures is economic value added (EVA), market value added (MVA), and refined economic value (REVA) This performance measurement holds the view that increasing value means also increasing long-term shareholder investment returns. Steward (2013: 115) states that value measures are considered to have capabilities that exceed Another performance measurement, because it takes into account all factors related to the creation (value) of the company that have an impact on the increasing prosperity of shareholders. The purpose of this study is to test EVA, MVA, and REVA against stock prices and stock returns. In this study using a research sample of 104 manufacturing companies taken through random sampling in the period 2014-2016. Data analysis and hypothesis testing in this study used the Partial Least Square Path Modeling (PLS-SEM) method. The results of this study show that EVA, MVA, and REVA have a significant positive relationship with stock price and stock return . By looking at the results of this study, it shows that performance appraisal using the EVA, MVA, and REVA methods has a strong influence on stock prices and stock returns . This shows that value-based valuation is important because every investment cannot escape the consequences of the incurring cost of capital as compensation for the funds used to finance the investment. The return on an investment will only mean that if the amount of return exceeds the cost of capital incurred to realize the investment, measurement certainly requires an accurate valuation method.

Long-term straw return improves cooked indica rice texture by altering starch structural, physicochemical properties in South China

Straw return can improve rice eating quality by modifying starch formation from long-term field trials, whereas the relevant mechanisms are still unknown. A long-term field experiment, including straw removal (CK), straw burning return (SBR), and straw return (SR) was conducted to investigate the starch structure, physicochemical properties, and cooked rice textures of indica early- and late-rice. Compared with CK, SBR and SR enhanced relative crystallinity, amylopectin long chains in both rice seasons, and gelatinization temperatures in late rice. Compared to SBR, SR decreased protein content and amylopectin short chains but increased starch branching degree, breakdown, and stickiness, ultimately contributing to improved starch thermal and pasting properties. Meanwhile, SR decreased hardness, cohesiveness, and chewiness, resulting in cooked texture meliorated, which was mainly attributed to amylopectin chain length and starch granule size. The results suggest that SR increased cooked texture of indica rice by altering starch structural and physicochemical properties.

Optimal investment decision for industry 4.0 under uncertainties of capability and competence building for managing supply chain risks

This study analyses a risk-averse firm’s decision to invest in Industry 4.0 (I4.0) in the presence of supply chain risks (SCR). Literature suggests that I4.0 assists the firm in mitigating SCRs by enhancing its capability and competence. However, due to SCRs associated with I4.0, building only capability and competence does not necessarily help the firm to improve its resilience from any uncertain fluctuations in ex-post net profit from the long-term return. Therefore, it is essential to investigate how a risk-averse firm makes an optimal investment decision in implementing I4.0 when SCRs impair capability and competence, where we determine a firm’s optimal investment decision in terms of utility defined over the expected value and variance of its ultimate random profit from investing in I4.0. This study employs a mean-variance decision-theoretic model to examine I4.0 investment risk-return trade-offs under uncertainties stemming from two types of SCRs, namely system and operational risks, influencing the firm’s capability and competence achievements, respectively. The model demonstrates that under certain sufficiency conditions on the relative risk-return trade-offs, higher variation in capability or competence, or greater congruency between the SCRs, may lead to a lower optimal investment decision in I4.0. However, the optimal investment may increase with higher expected capability or competence for a given level of these SCRs. Finally, we conduct a simulation of the theoretical model, using vignette-based experimental data as the benchmark parameter values, to quantify the predictive ability and analytical merits of our model by identifying risk-return trade-offs.

Unraveling market mysteries: a comprehensive review of financial anomalies and puzzles

This comprehensive literature review consolidates various market anomalies and puzzles, providing an aggregated perspective to understand these complex dynamics that challenge the traditional Efficient Market Hypothesis. We examined numerous academic works to reveal insights into long-term return irregularities, earnings management influence on equity offerings, and information uncertainty’s impact on stock returns. The review delves into unique phenomena like persistent mutual fund performance, the day-of-the-week returns, the January effect, weather-induced mood shifts on the market, and the dynamics of multiple anomalies. International asset pricing and weekend anomalies were also discussed, with a particular focus on cryptocurrency efficiency. Incorporating behavioral finance perspectives, we explored social transmission bias, emotional finance, biased beliefs, investor optimism, sentiment, and global market inefficiencies. The influence of unique events and seasonal factors, such as the Super Bowl, daylight saving time, and the Halloween effect, were also analyzed. The review concludes by highlighting the evolving landscape of market anomalies, discussing ma- chine learning approaches to anomaly research, investor behavior challenges, and the disappearing anomalies in country and industry returns. It sets the groundwork for holistic comprehension of market anomalies, suggesting future research directions such as exploring new data sources, comprehensive theoretical modeling, and the role of technology, market regulations, and environmental changes on market anomalies.

Silvopasture offers climate change mitigation and profit potential for farmers in the eastern United States

Silvopasture—integrating trees, forage, and grazing livestock on the same piece of land—is increasingly popular, given its potential to store carbon (C) and improve farmers’ livelihoods. We examined the C and economic implications of adding different silvopastoral systems to existing pastures in historically forested areas of the eastern United States (U.S.). We assessed nine distinct systems, varying by species and product (timber, nuts, and fodder for livestock), for two market scenarios: one based on current demand and one that assumes increased demand for products from silvopasture systems. For each system, we assessed C storage (biomass) and economics (internal rates of return (IRR) with and without C payments). We find that silvopasture in the eastern U.S. could expand by 5.6–25.3 million hectares under base case and full adoption scenarios (equaling a 6% increase in the global footprint of silvopasture), and could capture up to 4.9 or 25.6 Tg CO2e yr.−1, respectively. Expansion of silvopasture in these scenarios would come largely from demand for fodder as a supplemental feed, as well as specialty timber products. Per ha mitigation potential varied widely (0.5–6.5 tCO2e ha−1 yr.−1), due to species differences in C accumulation rates. Economics differed too, with some systems offering short break-even timelines (e.g., 7–9 years for fodder systems), and others costing more up front but having greater long-term returns (e.g., Chestnut). Furthermore, while some systems are profitable without any price on C (e.g., fodder-based silvopasture offers 6–14% 10-year IRRs without a price on C), higher payments for C would likely be necessary to unleash broad investment in timber and nut-based silvopasture. Our analysis included planting, maintenance, and harvest costs and tree product revenue. Future work is needed to fully incorporate additional considerations, like loss of grazing use during establishment, shade-induced effects on forage production, and livestock productivity. Furthermore, specific economic, ecological, site- and operation-level considerations are critical to evaluate the appropriateness of silvopasture systems for a given setting. This analysis suggests that across the eastern U.S., silvopasture could offer both climate change mitigation and enhanced profitability for farmers, with notable differences in the system-specific magnitude of opportunity.

Outcome and racing performance following standing fracture repair in 245 horses.

Repair of sagittal proximal phalanx (P1) and parasagittal metacarpal/metatarsal III (MC/MTIII) fractures has evolved over recent decades from a procedure carried out solely under general anaesthesia, to one commonly performed under standing sedation. To date, standing fracture repair has not been evaluated for large cohorts. To determine short-term (survival to discharge) and long-term (return to racing) outcomes of horses undergoing standing repair of MC/MTIII and P1 fractures, and to compare pre-surgical and post-surgical racing performance. Single-centre retrospective cohort study. Retrospective clinical record review of 245 cases undergoing standing repair of MC/MTIII or P1 fractures, 1 January 2007-30 June 2021. Data on signalment, fracture configuration and complications were collected and full race records were retrieved from the Racing Post Database (wwww.racingpost.com). Chi-squared and Mann-Whitney U tests were used to determine any difference in variables between horses that raced after surgery compared to those that did not. McNemar change and Wilcoxon signed-rank tests were used to compare pre- and post-surgical racing performance, p ≤ 0.05. Ninety-eight percent [95% confidence interval (CI): 96.2%-99.7%] of horses survived hospital discharge, and 75.1% (95% CI: 68.9%-81.4%) raced after surgery, a median of 241 days later. Horses that raced post-surgery were significantly less likely to have suffered from complications during hospitalisation than those that did not race again [17.3% (95% CI: 11%-24%) vs. 36.5% (95% CI: 23%-50%), p = 0.005]. Comparing pre- and post-operative racing performance, there was no significant difference in earnings per start [median £628.00, interquartile range (IQR) 115.90-1934.80 vs. £653.20, 51.00-1886.40, p = 0.7] or proportion of horses winning [51% (95% CI: 41%-61%) vs. 54% (95% CI: 44%-64%), p = 0.8] or being placed first-third [77% (95% CI: 68%-85%) vs. 71% (95% CI: 62%-80%, p = 0.5] in at least one race. Retrospective nature of study with reliance on clinical records and public databases, limiting data available for analysis. Standing fracture repair is a viable treatment option for MC/MTIII or P1 fractures that returns horses to the racetrack within an acceptable time frame and is capable of restoring pre-surgical athletic ability.

Investment Performance of Voluntary Pension Funds’ Portfolios

To ensure adequate retirement income it is usually recommended to save „more and for longer periods”. However, this is not enough. Consumers often overlook the importance of long-term returns on retirement investments. At the same time, the Bulgarians award a lower assessment for the market performance of the services „investment products and private personal pensions” compared to the average for the European Union. The present research aims to analyze the investment results of the voluntary pension funds in Bulgaria for the decade, marked by unprecedented low interest rates and pandemic.

Outward foreign direct greenfield investments and firms predicted long-term stock volatility levels and connectedness. Evidence from China

The paper offers an initial effort to unfold the effect of outward foreign direct greenfield investments (OFDGIs) on firms' long-term stock return volatility levels and connectedness. Within a sample of Chinese firms, in a GARCH-MIDAS model, we offer evidence that OFDGIs investments will reduce firms' long-term stock return volatility. We also introduced a measure of firms' stock return volatility connectedness and studied OFDGIs' effect on firms' dependence on other firms' risks. Implications for theory and practice are discussed.

Partial portfolio disclosure, investors’ attention, and window dressing

I show that the disclosure of mutual funds’ holdings significantly affects investors’ investment decisions. As most mutual fund websites, advertisements, and fund-trading platforms only disclose a fund’s 10 largest holdings (top-10), this study finds that investors disproportionately focus on these stocks. However, this bias does not lead to additional profit because relative to their peers, funds with good top-10 performance tend to generate poor long-term returns. I design a clean and innovative discontinuity test between the performance of the 10th and 11th portfolio holdings to examine such window dressing behavior. I find that relative to their peers, funds that are small, new, and highly active are more likely to window dress and incur greater costs if they suffer from severe capital outflows. My findings suggest that partial disclosure misleads investors and allows effective window dressing.

Private Placement, Investor Sentiment, and Stock Price Anomaly

The private placement of A-shares gained momentum with the release of the Administrative Measures for Securities Issuance of Listed Companies in 2006. This led to enhanced research on the impact of private placement on stock prices. In 2012, the Chinese government relaxed the requirements for directed issuance of listed companies, resulting in a surge of directed issuance since then. This study uses a sample of listed companies that conducted private placements in the A-share market between 2013 and 2021, to analyze the impact of investor sentiment on stock price differences after private placements from the perspective of short and long-term excess returns. This study constructs the non-main investor sentiment of individual stocks using high-frequency tick data of individual stocks and explores the relationship between this stock price anomaly and investor sentiment using multiple regression analysis. The results show a positive short-term announcement effect of A-share private placements, with the excess return rate occurring mainly before the plan announcement date. The stock price difference from the plan announcement date to ten trading days thereafter has a significantly negative relationship with the excess return rate. Furthermore, investor sentiment in private placements may negatively affect long-term stock performance. This study suggests that this phenomenon is caused by higher investor sentiment pushing stock prices upward in the short term, causing them to deviate from fundamentals, creating mispricing, and then driving them back to fundamentals, with information disclosure. After controlling for the severity of information disclosure, the effect of investor sentiment on long-term stock price performance becomes insignificant.

REIT Long-Term Returns and Wealth Creation

This study examined the performance of 371 equity real estate investment trusts (REITs) over the period 1972–2020. Unlike stocks, we found that the majority of the 371 REITs outperformed one-month T-bills, particularly over longer holding periods and in the modern REIT era. While most REITs outperformed the T-bills, only a minority of them outperformed the overall equity REIT market. REITs that outperformed the overall equity REIT market concentrated in the health care, industrial, residential, and other specialty REIT sectors. In terms of wealth creation, REITs in aggregate created a total net wealth of $0.89 trillion to their shareholders, but the wealth creation was highly concentrated in relatively few top-performing REITs. Specifically, the top five (20) REITs together accounted for almost 30% (60%) of the total net wealth creation. Overall, our results suggest that relative to the T-bills, REITs performed better than stocks.

Reducing the uncertainty of ULS load estimates in offshore structural design

The design process of any offshore structure, including Wave Energy Converters (WECs), aims to assess a series of critical conditions, often encapsulated in the concept of ‘limit states’, that define the ‘design boarders’ across which a structure is unlikely to respond satisfactorily, potentially leading to functional failure(s). The Load and Resistance Factor Design (LRFD) method aims to quantify such ‘design boarders’ with adequate safety margins on both the loading and the resistance sides of the design inequality. An inherent risk of such approach is that the definition of ‘adequate’ may be clouded by multiple sources of uncertainty, making it challenging to assess if a system is likely to be under- or over-designed from inception.
 Although overall guidance for the design process of a WEC can be sought from related industries – see e.g. [1], and while noting that generic guidance for WEC design is available in e.g. [2], there is at present limited (practical) guidance on how to derive estimates of long-term return period loads. In recent work, comparative assessments of different load estimation methods have been made, illustrating the dependence of the outputs on the underlying method – see e.g. [3]. Additionally, and in connection with the assessment of extreme loads acting on WECs, the load post-processing methodology was identified in [4] as the major contributor to the uncertainty in Ultimate Limit State (ULS) load estimates.
 This paper presents a novel post-processing methodology to assess the uncertainty when estimating ULS loads acting on an offshore structure. To assess which statistical distributions are best suited to estimate long-term extreme loads, goodness-of-fit tests were performed using a series of input load time-series. The methodology was applied to evaluate the 50-year return load acting on the foundation of a generic Submerged Pressure Differential (SPD) WEC, based on the generic configuration originally defined in [5]. Results suggest that current conventional practices based on visual inspection(s) may lead to the selection of non-representative fitting functions which, in turn, likely lead to inaccurate extreme load estimations.
 Ultimately, the methodology described in this paper aims to contribute to a probabilistic approach to the definition of suitable safety factors, which in turn is expected to reduce the uncertainty in key design metrics and the risk of either under- or over-design.
 This study was conducted as part of the H2020 VALID and H2020 IMPACT projects.
 References
 [1] DNVGL-ST-0437. (2016). Loads and site conditions for wind turbines.
 [2] IEC/TS 62600-2. (2019). Marine energy — Wave, tidal and other water current converters Part 2: Design requirements for marine energy systems.
 [3] Michelen, C., Coe, R. Comparison of Methods for Estimating Short-Term Extreme Response of Wave Energy Converters, Sandia National Laboratories, SAND2015-6890C.
 [4] Atcheson, M., Cruz, J., Martins, T., Johannesson, P., Svensson, T. (2019). Quantification of load uncertainties in the design process of a WEC, Proc. 13th European Wave and Tidal Energy Conference (EWTEC 2019), Naples, Italy.
 [5] Babarit, A., Hals, J., Muliawan, M.J. et al. (2012). Numerical benchmarking study of a selection of wave energy converters. Renewable Energy 41, 44-63.

Technical analysis as a sentiment barometer and the cross-section of stock returns

This paper explores an unexamined sentiment channel through which technical analysis can add value. We use a spectrum of technical trading strategies to build a daily market sentiment indicator that is highly correlated with other commonly used sentiment measures. This technical-analysis-based sentiment indicator positively predicts near-term returns and is inversely related to long-term returns in the cross-section. Simple trading strategies based on this sentiment indicator yield substantial abnormal returns. These results are consistent with the explanation that lack of synchronization induces rational arbitrageurs to exploit the mispricing before it is corrected.

Relative informative power and stock return predictability: a new perspective from Egypt

Purpose This paper aims to introduce a new perspective on long-term stock return predictability by focusing on the relative (individual and hybrid) informative power of a wide range of accounting (firm-related), technical and macroeconomic factors while considering the past performance of the stocks using machine learning algorithms. Design/methodology/approach The sample includes a panel data set of 94 non-financial firms listed in Egyptian Exchange 100 index from 2014: Q1 to 2019: Q4. Relativity has been investigated by comparing relevant factors’ individual and combined informative power and differentiating between losers and winners based on historical stock returns. To predict the quarterly stock returns, Gaussian process regression (GPR) has been used. The robustness of the results is examined through the out-of-sample test. This study also uses linear regression (LR) as a benchmark model. Findings The past performance and the presence of other predictors influence the informative power of relevant factors and hence their predictive ability. The out-of-sample results show a trade-off between GPR and LR with proven superiority to GPR in limited experiments. The individual informative power outperforms the hybrid power, in which macroeconomic indicators outperform the remaining sets of indicators for losers, while winners show mixed results in terms of various performance evaluation metrics. Prediction accuracy is generally higher for losers than for winners. Practical implications This study provides interesting insight into the dynamic nature of the predictor variables in terms of stock return predictability. Hence, this study also deepens the understanding of asset pricing in a way that directly contributes to practitioners’ portfolio diversification strategies. Originality/value In concern of the chaos of factors in the literature and its accompanying misleading conclusions, this study takes another look at the approach that studies stock return predictability. To the best of the authors’ knowledge, this is the first study in the Egyptian context that re-examines the predictive power of the previously discovered factors from a different perspective that highlights their relative nature.