The empirical joint distribution of return-pairs on stock indices displays high tail-dependence in the lower tail and low tail-dependence in the upper tail. The presence of tail-dependence is not compatible with the assumption of (conditional) joint normality. The presence of asymmetric-tail...

This paper questions traditional approaches for testing the day-of-the-week effect on stock returns. We propose an alternative approach based on the closure test principle introduced by Marcus, Peritz and Gabriel (1976), which has become very popular in Biometrics and Medical Statistics. We test...

In this paper, we examine the evolution of the S&P500 returns volatility around market crashes using a Markov-Switching model. We find that volatility typically switches into the high volatility state well before a crash and remains in the high state for a considerable period of time after the...

Density forecasts have become quite important in economics and finance. For example, such forecasts play a central role in modern financial risk management techniques like Value at Risk. This paper suggests a regression based density forecast evaluation framework as a simple alternative to other...

This paper explores the determinants of corporate failure and the pricing of financially distressed stocks using US data over the period 1963 to 2003. Firms with higher leverage, lower profitability, lower market capitalization, lower past stock returns, more volatile past stock returns, lower...

Using monthly data for the period 1953-2003, we apply a real-time modeling approach to investigate the implications of U.S. political stock market anomalies for forecasting excess stock returns. Our empirical findings show that political variables, selected on the basis of widely used model...

This paper investigates empirically the interrelationships between the daily stock market returns of the Nikkei 225, DAX and Dow Jones Industrial index. Contrary to former work this paper uses the succession of the markets in time to form different econometric models. In this way it is possible...

This paper examines return predictability when the investor is uncertain about the right state variables. A novel feature of the model averaging approach used in this paper is to account for finite-sample bias of the coefficients in the predictive regressions. Drawing on an extensive...