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We perform a comprehensive examination of the recursive, comparative predictive performance of a number of linear and non-linear models for UK stock and bond returns. We estimate Markov switching, threshold autoregressive (TAR), and smooth transition autoregressive (STR) regime switching models,...
Persistent link: https://www.econbiz.de/10008990694
Using a latent variables approach, we estimate the dynamics of dividends and returns in a tractable present-value model with time-varying risks. Expected returns imply a similar return predictability as under homoskedasticity, while expected dividend growth is more persistent and explains a...
Persistent link: https://www.econbiz.de/10012976115
This paper examines the impact of intraday periodicity on forecasting realized volatility using a heterogeneous autoregressive model (HAR) framework. We show that periodicity inflates the variance of the realized volatility and biases jump estimators. This combined effect adversely affects...
Persistent link: https://www.econbiz.de/10012063222
In asset pricing, most studies focus on finding new factors such as macroeconomic factors or firm characteristics to explain risk premium. Investigating whether these factors are useful in forecasting stock returns remains active research in the field of finance and computer science. This paper...
Persistent link: https://www.econbiz.de/10014235825
This paper aims at improved accuracy in testing for long-run predictability in noisy series, such as stock market returns. Long-horizon regressions have previously been the dominant approach in this area. We suggest an alternative method that yields more accurate results. We find evidence of...
Persistent link: https://www.econbiz.de/10013078663
Two volatility forecasting evaluation measures are considered; the squared one-day ahead forecast error and its … standardized version. The mean squared forecast error is the widely accepted evaluation function for the realized volatility … forecasting accuracy. Additionally, we explore the forecasting accuracy based on the squared distance of the forecast error …
Persistent link: https://www.econbiz.de/10012910114
For many benchmark predictor variables, short-horizon return predictability in the U.S. stock market is local in time as short periods with significant predictability (‘pockets') are interspersed with long periods with little or no evidence of return predictability. We document this result...
Persistent link: https://www.econbiz.de/10012899675
Persistent link: https://www.econbiz.de/10010199463
Regularizing Bayesian predictive regressions provides a framework for prior sensitivity analysis via the regularization path. We jointly regularize both expectations and variance-covariance matrices using a pair of shrinkage priors. Our methodology applies directly to vector autoregressions...
Persistent link: https://www.econbiz.de/10012968480
Persistent link: https://www.econbiz.de/10014251571