We construct portfolios of stocks and of bonds that are maximally predictable with respect to a set of ex ante observable economic variables, and show that these levels of predictability are statistically significant, even after controlling for data-snooping biases. We disaggregate the sources for predictability by using several asset groups---sector portfolios, market-capitalization portfolios, and stock/bond/utility portfolios---and find that the sources of maximal predictability shift considerably across asset classes and sectors as the return-horizon changes. Using three out-of-sample measures of predictability---forecast errors, Merton's market-timing measure, and the profitability of asset allocation strategies based on maximizing predictability---we show that the predictability of the maximally predictable portfolio is genuine and economically significant.

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