We re-examine predictability of US stock returns. Theoretically well-founded models predict that stationary combinations of I (1) variables such as the dividend or earnings to price ratios or the consumption/asset/income relationship often known as CAY may predict returns. However, there is...

A financial conditions index (FCI) is designed to summarise the state of financial markets. Two are constructed with UK data. The first is the first principal component of a set of financial indicators. The second comes from a new approach taking information from a large set of macroeconomic...

We consider time series forecasting in the presence of ongoing structural change where both the time series dependence and the nature of the structural change are unknown. Methods that downweight older data, such as rolling regressions, forecast averaging over different windows and exponentially...

We examine how to forecast after a recent break, introducing a new approach, monitoring for change and then combining forecasts from a model using the full sample and another using post‐break data. We compare this to some robust techniques: rolling regressions, forecast averaging over all...

We examine how to forecast after a recent break. We consider monitoring for change and then combining forecasts from models that do and do not use data before the change; and robust methods, namely rolling regressions, forecast averaging over different windows and exponentially weighted moving...

Motivated by a number of puzzles about the recent behaviour of business investment in the United Kingdom (including the boom in the late 1990s and the prolonged weakness thereafter), this article brings together some of the main results of recent research on investment undertaken by the Bank and...

DSGE models are of interest because they offer structural interpretations, but are also increasingly used for forecasting. Estimation often proceeds by methods which involve building the likelihood by one-step ahead (h=1) prediction errors. However in principle this can be done using different...

Theory tells us that output, the capital stock and the user cost of capital are related. From the capital accumulation identity, it also follows that the capital stock and investment have a long-run proportional relationship. The dynamic structure thus implies a multicointegrating framework, in...