We question the appropriateness of using time-invariant indices as benchmarks and propose a regime-switching methodology to identify the time-varying de facto benchmarks from a pool of the market-based indices, with or without a risk-free asset. We highlight the benchmark mismatch phenomenon and...

In this paper, we propose three new predictive models: the multi-step nonparametric predictive regression model and the multi-step additive predictive regression model, in which the predictive variables are locally stationary time series; and the multi-step time-varying coefficient predictive...

This paper investigates the performance of a factor-augmented regression (FAR) model with a mixture of stationary and nonstationary factors in stock return prediction. For comparison purpose, we also consider a traditional FAR model with only stationary factors. In an application with a dataset...