We study the directional predictability of monthly excess stock market returns in the U.S. and ten other markets using univariate and bivariate binary response models. Our main interest is on the potential benefits of predicting the signs of the returns jointly, focusing on the predictive power...

Several empirical studies have documented that the signs of excess stock returns are, to some extent, predictable. In this paper, we consider the predictive ability of the binary dependent dynamic probit model in predicting the direction of monthly excess stock returns. The recession forecast...