This paper proposes a novel semiparametric time-varying model for long-horizon predictive regressions in which the coefficients are allowed to change over time with unspecified functional forms. A linear projection method is employed to deal with the embedded endogeneity issue. We pursue an...

According to present-value models, a financial valuation ratio should predict future stock returns or cash flows but empirically shows little power. This paper develops insights about stock return predictability and reconciles the contradicting findings. We decompose a financial ratio into (1) a...

Motivated by the present-value framework, this article proposes a novel and flexible semiparametric time-varying model to examine the so-called `pockets of predictability,' i.e., stock returns or cash flows are significantly predictable in a given local period. We apply a semiparametric profile...