Notes from the Observatory: ETF Price History Predicts Performance

In this article, I report on some recent findings from my little nonrigorous garden of stock market metrics. Due to the small number of observations (36 index ETFs and 55 individual stocks), we must consider these findings as hypotheses, rather than fully reliable assessments. I’ll be interested to know if you have confirming or contrary information.

The ten-year history of price growth for index ETFs correlates (R^2=.34) positively with future prices. A higher rate of historical growth predicts increasing price.

This contrasts with our observation in January.

We found no significant similar relationship for individual stocks.

The annualized dividend growth over the previous five years for index ETFs correlates (R^2=.24) positively with future price changes. Index ETFs with higher rates of dividend growth tend to increase in price.


We saw similar results previously in January and last July.

We found no significant similar relationship for individual stocks.

We found price to book ratio mildly correlated positively with future stock price among individual stocks with price to book ratio less than 20.

We found no significant price predictors among these metrics:
1. Price to book ratio for ETFs.
2. Market capitalization.
3. Revenue growth for individual stocks.

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Disclosure:

Daniel Brockman owns index ETFs VOO, SLYG, XBI, SLYV, EWJ, MDYG, EWU, FEZ, VNQI, VNQ and VHT.

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