This paper investigates, both in finite samples and asymptotically, statistical inference on predictive regressions where time series are generated by present value models of asset prices. We show that regression-based tests, including optimal robust tests such as Jasson and Moreira's...

The predictability of long-term asset returns increases with the time horizon as estimated in regressions of aggregated-forward returns on aggregated-backward predictive variables. This previously established evidence is consistent with the presence of common slow-moving components that are...

We propose using a permutation test to detect discontinuities in an underlying economic model at a known cutoff point. Relative to the existing literature, we show that this test is well suited for event studies based on time‐series data. The test statistic measures the distance between the...

We develop a finite-sample procedure to test for mean-variance efficiency and spanning without imposing any parametric assumptions on the distribution of model disturbances. In so doing, we provide an exact distribution-free method to test uniform linear restrictions in multivariate linear...

Many postulated relations in finance imply that expected asset returns strictly increase in an underlying characteristic. To examine the validity of such a claim, one needs to take the entire range of the characteristic into account, as is done in the recent proposal of Patton and Timmermann...

This paper proposes a novel test of zero pricing errors for the linear factor pricing model when the number of securities, N, can be large relative to the time dimension, T, of the return series. The test is based on Student t tests of individual securities and has a number of advantages over...

This paper proposes a novel test of zero pricing errors for the linear factor pricing model when the number of securities, N, can be large relative to the time dimension, T, of the return series. The test is based on Student t tests of individual securities and has a number of advantages over...

This paper develops a Monte-Carlo backtesting procedure for risk premia strategies and employs it to study Time-Series Momentum (TSM). Relying on time-series models, empirical residual distributions and copulas we overcome two key drawbacks of conventional backtesting procedures. We create...

Recent empirical evidence suggests that the variance risk premium predicts aggregate stock market returns. We demonstrate that statistical finite sample biases cannot “explain” this apparent predictability. Further corroborating the existing evidence of the U.S., we show that country...