Forecasting Stock Returns Using Model-Selection Criteria
This paper examines the economic significance of return predictability in Australian equities. In light of considerable model uncertainty, formal model-selection criteria are used to choose a specification for the predictive model. A portfolio-switching strategy is implemented according to model predictions. Relative to a buy-and-hold market investment, the returns to the portfolio-switching strategy are impressive under several model-selection criteria, even after accounting for transaction costs. However, as these findings are not robust across other model-selection criteria examined, it is difficult to conclude that the degree of return predictability is economically significant. Copyright 2005 The Economic Society Of Australia.
Year of publication: |
2005
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Authors: | ALCOCK, JAMIE ; GRAY, PHILIP |
Published in: |
The Economic Record. - Economic Society of Australia - ESA, ISSN 1475-4932. - Vol. 81.2005, 253, p. 135-151
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Publisher: |
Economic Society of Australia - ESA |
Saved in:
freely available
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